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