Why Alaska’s Permanent Fund Should Buy Russell’s Investment Consulting Arm

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When Russell Investments was on the selling block, the buyer universe was limited because potential acquirers did not want the whole enchilada. Many buyers wanted the crown jewel, the high-margin index business of Russell. Why? US$ 5.2 trillion worth of assets are benchmarked against Russell indices. When the London Stock Exchange Group (LSE) acquired Russell Investments for US$ 2.7 billion, it was apparent the exchange wanted Russell’s highly profitable index business. The deal enabled LSE access as a marquee player in U.S.-listed exchange-traded funds. The LSE has hired Greenhill & Co. and Barclays on the sale process for the rest of Russell’s businesses, hoping to fetch around US$ 1.5 billion. The LSE has also indicated they might not sell the unit.

In 2013, Russell Investments’ index business posted US$ 170 million in revenue with almost a 50% profit margin. This is compared to Russell’s consulting division, which generated around US$ 40 million in 2013 and profits in the 15% to 17% range. Just the profit margin difference between the divisions, makes a convincing business case for LSE to dump the rest of Russell Investments.

“Nowadays people know the price of everything and the value of nothing.”
― Oscar Wilde, The Picture of Dorian Gray

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