Eight months into his role as president & head of advisor & intermediary solutions, Canada at Russell Investments, Jonathan Needham has come a long way from his days as an inside wholesaler at Fidelity Investments, a gig he left 22 years ago.
After 40 years in Canada, the global asset manager has $11.5 billion in assets under management here, as of June 30. That represents roughly 2.4% of the US$355 billion the firm manages for clients in 30 countries. He and I sat down at Future Proof Festival in Huntington Beach, Calif. to talk about his business, markets and the apparent disconnect between record-setting equity market highs and the industry’s emphasis on alternatives.
“When you saw interest rates go to zero, alts became an option to generate consistent income — more income than you could get from money markets,” Needham told me. Canadian investors experienced that following the global financial crisis, to a lesser extent after the eurozone debt crisis and then again post-Covid.
“That drove interest initially,” he said. “Why do I think there’s still interest in alts? It’s been proven that there are long-term portfolio construction and diversification benefits.”
There is a counter-argument to this of course, which is that the alts boom has been more push than pull. Asset managers have limited growth potential for alternative strategies on the institutional side of the business, so it makes sense that they’d turn to retail channels for growth.
Needham said there’s a genuine demand among investors, particularly given the elevated valuations attached to technology and other high-flying stocks.
“There’s a fear of equity markets and fear of the valuations,” he said. “And there’s a lot of debt out there — government debt. So how do we preserve capital?”
Needham is hardly a bear, though. “We’re still positive on markets overall. Equities have some room to run. We are certainly seeing more attractive valuations in international markets. … We’re neutral to modestly overweight equities.”
Russell Investments likes domestic fixed income too. “There is some upside in the Canadian bond market that I don’t think clients are quite embracing to the degree that they used to,” Needham said. “There’s a perfect example where active management can provide some value.”
Watch for a new release in the core-plus category from Russell Investments. Needham’s team is preparing a filing “in the next few weeks.”
He also has an eye on delivering “more personalized services” to Canadian investors.
“Think about direct indexing and the growth of that business,” Needham said. “You’re providing tax alpha. That becomes more and more important, the higher your net worth. … I think one of our fastest growing parts of the market is personalized, managed accounts. I think you’re going to see that come to the Canadian marketplace.”
That demands resources of course, and the kind of scale that supports white-glove service levels. “You need to continue to grow when you look at some of the behemoths in the marketplace,” Needham said. “Russell Investments is open to organic growth and strategic partnership in Canada.”