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Russell Investments selects Vestmark to power personalised managed accounts with tax-managed overlays


Russell Investments has selected Vestmark, a provider of portfolio management and trading software and outsourced services, to power the design, construction and management of an array of inventive Personalized Managed Accounts (PMA) that can be customised to meet a wide range of client needs. PMA will initially feature six tax-managed separately managed accounts (SMA) that leverage technology to help meet both growth and optimal after-tax outcomes. These distinctive solutions will include three actively managed equity SMAs, two direct-indexed SMAs and a core equity SMA, which combine active and lower-cost direct indexing. Each will provide financial advisors with the opportunity to customise their high-net-worth investors’ portfolios to individual preferences.

“Most tax-sensitive investors have highly specific needs, which can’t always be met with standard investment vehicles. With our own PMA engine, we’re aiming to address the evolving investment needs of advisors with scalable, custom-tailored solutions,” says Brad Jung, head of North America Advisor and Intermediary Solutions at Russell Investments. “By leveraging the award-winning VestmarkONE technology platform, we expect to seamlessly integrate and connect with intermediary program sponsors and platform providers to offer a wide array of personalised investment solutions.”

Beyond the SMAs expected to launch in the fourth quarter of 2020, the UMA capabilities of the VestmarkONE platform will allow the scale and flexibility to create diversified portfolios utilising multiple SMA strategies with customisation options available to advisors.

The PMA solutions will feature dedicated portfolio managers, quantitative research analysts and service teams; centralised trading and implementation; as well as automated year-round tax management including tax-loss harvesting, wash sale minimisation, tax-smart turnover and managing holding periods. Ultimately, the three objectives to help meet desired outcomes will be to minimise the impact of taxes, maintain tracking error to the target portfolio and minimise transaction costs.

Jung said Russell Investments’ PMA aims to serve wealth management firms and their advisors with the institutional-caliber solutions that have made the firm a global leader in outsourced investment management (OCIO). He expects it will be both value-additive and complementary to the firm’s current wealth management capabilities. “PMA aims to extend our track record of producing differentiated investment and business solutions that draw from the firm’s deep consulting expertise and analytic tools to help advisors optimise their business. This latest solution will be complemented by portfolio analytics and a service team dedicated to working with advisors on customisation, implementation and communication.”

Vestmark, which features a deep network of broker/dealer and asset manager clients, has experience working with a wide variety of end-client solutions as well as connecting sponsors and asset managers to deliver a broad suite of capabilities and solutions in an efficient and scalable way.

“It’s exciting to marshal our technological expertise and work with Russell Investments to power the next evolution of Personalised Managed Accounts,” says John Lunny, CEO of Vestmark. “Our collaboration will deliver investment solutions that ultimately better enable advisors to fulfil the investment needs of their clients through leveraging the scalable client personalisation, streamlined and automated tax management capabilities and overall flexibility inherent in our technology.”

Russell Investments’ launch of Personalised Managed Accounts also will further establish the firm’s leadership position in the managed accounts space, which according to Cerulli Associates’ US Asset Allocation Model Portfolios 2020 report, ranks as the industry’s top provider of asset allocation model portfolios based on total assets.

“The managed account industry has seen a resurgence over the past decade as investors look to gain more control and customisation of their portfolios,” said Robert Hostetter, global head of solutions at Russell Investments. “Our institutional investment solutions and OCIO heritage are highly relevant to this need, and we look forward to helping our clients and partners achieve their outcomes.”

Hostetter added that Russell Investments, in leveraging this new relationship with Vestmark, aims to expand the Personalised Managed Accounts program after the initial launch, eventually offering overlay and optimisation options for the firms’ collective clients featuring both environmental, social & governance (ESG) and factor exposures.

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