New fund increases tax efficiency in reallocated tax-managed model strategies
SEATTLE, June 12, 2019 — Global asset manager Russell Investments has launched the Russell Investment Company Tax-Managed Real Assets Fund for long-term investors who seek to diversify their portfolios with real assets and reduce the impact of taxes on their investment returns. Focusing on U.S. real estate, global infrastructure and global natural resources, the new fund aims to offer equity-like returns over a market cycle while mitigating downside risk relative to equities. The fund also implements tax-optimized strategies such as tax-loss harvesting, turnover management and yield reduction with a goal to manage the inherently higher tax implications in the real assets sector.
Patrick Nikodem, portfolio manager at Russell Investments, said, “Our research indicates real assets can offer attractive returns while exhibiting low correlations to global equities and acting as an effective diversifier within a broader portfolio context. With the firm’s deep experience in both tax-aware investing and management of real asset portfolios, we expect our tax-managed real assets solution will help clients meet their desired investment outcomes.”
For investors concerned about potential weakness in the U.S. and global equity markets, Nikodem added he believes real assets have the potential to offer some measure of downside protection in difficult environments while still capturing the majority of upside through a full market cycle. In addition, real assets may help to protect against the impact of rising inflation.
The new fund combines carefully selected third-party investment managers who specialize in the real assets sector. At launch, the line-up features the following allocation: Deutsche Asset Management (28%) manages an assignment for U.S. real estate investment trusts (REITs) exposure, Colonial First State Global Asset Management (21%) has a global listed infrastructure assignment, Grantham, Mayo, Van Otterloo & Co. (21%) has a global natural resources assignment, and Russell Investment Management, LLC (30%) manages tax-optimized and positioning strategies.
Regarding the implementation of tax-optimized strategies, Frank Pape, senior director, North America Portfolio Consulting Group at Russell Investments said, “While real assets play an important role in a multi-asset portfolio, taxes in this sector can present a drag if not addressed in tax-smart ways. Many miss the diversification real assets can provide. With our centralized trading and implementation capabilities, we maintain an overarching tax-managed view at the total portfolio level and implement steps to keep a close eye on after-tax outcomes.”
Russell Investments introduced its first tax-smart product in 1985 with a tax-exempt bond fund, which was followed by U.S. tax-managed equity funds in the 1990s and the firm’s first tax-managed model strategies in 2003.
With the launch of the Tax-Managed Real Assets Fund, Russell Investments also reallocated its tax-managed model strategies, effective June 11. The new fund accounts for 5-7% of the tax-managed model strategies, replacing the Global Real Estate Securities Fund and Global Infrastructure Fund. As a result, the overall allocation to tax-managed and tax-exempt funds increased, depending on the model, from a range of 91-96% to 95-100%.
About Russell Investments
With more than 80 years of experience, Russell Investments is a global investment solutions provider, dedicated to helping investors reach their long-term goals. Russell Investments offers investment solutions in 31 countries, manages US$290 billion in assets (as of March 31, 2019) and provides consulting services on $2.3 trillion in assets (as of December 31, 2018). Russell Investments specializes in multi-asset solutions and investment and implementation services with a goal of delivering the best investment strategies, managers and asset classes to its clients around the world. Headquartered in Seattle, Washington, Russell Investments operates globally with 21 offices, providing investment services in the world’s major financial centers such as New York, London, Tokyo and Shanghai.
Steve Claiborne, 206-505-1858, firstname.lastname@example.org
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