Completion portfolios

A powerful tool for attaining targeted exposures.

Even the best-designed multi-manager portfolio can move out of alignment with your investment policy statement. Just a small misalignment over time can result in exposure gaps, unintended risks, and a significant diversion from the path of your strategic investment beliefs.

When an investor allocates capital to more than one manager, an interaction effect exists, which will impact the investor's overall portfolio outcome. Due to this interaction effect between managers, unintended risks may emerge in the portfolio. Simply put, the combined positions of all managers may result in a bias toward a particular risk related to sector, region, or factor. These risks may not be fully aligned with the investor's preferred positioning based on long- and short-term investment opportunities and desired risk allocations.

Russell Investments' completion portfolios are designed to keep a client's investments precisely aligned with their investment beliefs without sacrificing the power of a multi-manager approach.

What are completion portfolios or portfolio completion strategies?

Completion portfolios (or portfolio completion strategies) are a powerful tool for an investor allocating to multiple manager strategies. The explicit role of these completion portfolios is to complement the existing managers and align the total portfolio with the desired risks and exposure of a client's total portfolio, thus managing the interaction effect.

Completion portfolios use security and derivative investments to target specific factors, sectors, regions, and currency exposures. This helps investors ensure that these risks are being managed and exposure gaps are being reduced while still allowing manager security selection to be the primary driver of overall performance.

The benefits of completion portfolios

Improve control of exposures

Completion portfolio strategies can provide a systematic way to solve for misalignment in portfolio exposures. They can help align the total portfolio with preferred positioning and improve the overall risk and return outcomes of an investor's portfolio.

Improve risk-adjusted returns

To achieve the desired long-term outcomes, portfolios must be managed to benefit from long-term return sources but with the ability to respond to short-term market risks and opportunities. Completion portfolios help investors achieve these outcomes.

Reduce the cost of production

In many cases, including a completion portfolio can help reduce the total cost expenditure on aggregate manager fees. It may also minimise turnover, trading, and required transition costs.

Four ways we help clients with completion portfolios

1. Better management of factor and portfolio risks
   
   Completion portfolios can ensure exposures to factor risks of the total portfolio are aligned with targets. This can mean reducing unintended exposure to volatility risk or targeting specific levels to other strategy factors such as value, momentum, quality, or others. In addition, the amount of active sector or regional risks are managed.
2. Gaining exposure to areas of the market where high conviction managers don't exist
   
   Completion portfolios are designed to fill gaps. Examples include deep or defensive value exposure, quality income, and intelligent credit or currency factors.
3. Unshackling PMs in their manager allocation decisions
   
   By creating risk management at the total-portfolio level, portfolio managers' decisions are freed up to focus on high-conviction alpha opportunities. In recent years, PMs focused on growth management while the completion portfolio provided value and low vol exposure to balance risk.
4. Opportunistic allocations
   
   When shorter-term opportunities arise in the market, the client can reposition risk in the portfolio in a nimble, precise, cost-effective manner.

The Russell Investments advantage

Experience matters. We've been building and managing completion portfolios for institutional clients since 2008. Our completion portfolio platform has expanded to approximately 100 individual separate accounts, with more than €18.8 B in AUM.¹ This includes completion portfolios used directly by institutional clients and those used within Russell Investments' multi-asset solutions.

Our seasoned specialists provide the expertise, resources, and infrastructure required to design and implement customised investment frameworks to address interaction effect and optimise your portfolio to improve risk-adjusted performance and prevent unintended and uncompensated risk.

We provide opportunities for clients with synthetic overlays to utilise liquidity more efficiently by investing in optimised strategies that align with their desired fixed income exposures.

Capabilities for greater portfolio precision

Factor investing has been one of Russell Investments' core capabilities for more than 40 years since the launch of the Russell-style indexes.

Our factor investing has continued to innovate and advance—from using factor exposures in our funds through our direct investing capabilities to having pure multi-factor funds. We use thoughtful and academically supported factor definitions, robust portfolio construction techniques, and consistent risk models.

¹ Russell Investments as at 31 December 2023.

Customized Portfolio Solutions

Specialist expertise and strategies to help your team gain greater portfolio control, limit costs, reduce risk, and enhance returns.

Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.

The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested.