Northwestern Mutual mulls selling Russell Investments, sources say

Claim asset manager may not be seen as a core asset; insurer says unit is not for sale

Aug 25, 2010 @ 4:07 pm

By Jessica Toonkel

Northwestern Mutual Life Insurance is discussing selling Russell Investments, according to a number of investment bankers and industry observers. Management at the insurer has decided that the $140 billion Russell isn't a core asset — and is seriously considering putting the business up for sale, they said.

Darryll Fortune, a spokesman for Northwestern, said that Russell is not for sale. He declined to comment on rumors that Northwestern was considering putting the firm up for sale. Jennifer Tice, a Russell spokeswoman, said the firm didn't comment on industry rumors.

Russell has suffered a series of setbacks over the past few years, observers said. Within the past two years, the firm asked its chief, Craig Ueland, to resign, saw a number of executives leave and laid off 400 employees, according to Pensions & Investments, a sister publication of InvestmentNews. In March, chief financial officer Frank Ryan and chief of staff Terry Berland announced their departures, according to Pensions & Investments.

Industry officials who have spoken to Russell Investments employees said that there will be more departures. Andrew Doman, a former McKinsey & Co. executive who was named Russell's president and CEO last year, is relocating the firm's headquarters from Tacoma, Wash., to Seattle in October. Although the move is only 34 miles away, some employees are not thrilled by the prospect of a longer commute.

“We are getting outreach from employees there,” said one industry recruiter. “You can pick those guys clean.”

Ms. Tice disputed the notion that overall employees were unhappy about the move. “That's a mischaracterization,” she said. “This is a big organization and there are some people who are excited about the move and others who might not be.”

To help employees transition to the new commute, Russell is paying for buses, ferries and trains. Additionally Russell allows employees to telecommute and work flexible schedules, Ms. Tice said. Finally, the firm is giving employees a $700 allowance per year for gym membership of their choice. Russell has 1,800 employees worldwide, 900 of whom are in the United States.

Many of Russell's business struggles stem from the 2008 financial market meltdown, observers said. In 2008, the firm shut down its fund-of-hedge-funds operation.

Russell's money market funds had exposure of more than 5% to securities of Lehman Brothers Holdings Inc., which went bust in 2008. As a result, Northwestern Mutual put $764 million into those money funds to prevent them from breaking the buck.

Earlier this year, Russell sold its private-equity manager, Pantheon Ventures Ltd., to Affiliated Managers Group Inc. for $775 million.

Any discussions going on at Northwestern are very preliminary and no investment bankers had heard if the insurance company had retained a banker.

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