Tower outsources business arm to Russell

In a significant change to the structure of its operations, Tower Australia has appointed Russell Investment Group to run its multi-manager investment product business arm.

Tower had considered boosting its existing in-house investment management capabilities to drive this part of its business forward, currently with $2.6 billion in funds under management, but found the exercise would be too costly, and finding a noteworthy point of difference from the other fund managers in the market too difficult. As such, outsourcing became the preferred option.

After a rigorous tendering process, Tower chose Russell to manage its products ahead of Mercer, Intech, and AMP Capital Investors.

“We’ve got a very strong relationship with advisers that have predominantly come through the life insurance world, many of whom are both risk advisers and financial planners. We see one of our core competencies in servicing those relationships, and we feel there’s a need to give them a simple, consistent, high performing investment product. To do that, we felt we needed to partner with the likes of an organisation like Russell,” explained Tower Investments chief executive Grahame Evans.

He said that while all of the candidates were of the highest quality, Russell’s history in working with other major financial planning dealer groups separated it from the rest.

Managing director of Russell in Australasia Alan Schoenheimer thinks Tower’s investors will now be able to gain from his company’s track record of providing strong returns on a consistent basis.

“We’re continually improving and innovating, and seeking out new sources of value add. We’re also going into new areas of the market, what they call alternative areas, and all of that will eventually flow through to Tower’s investors,” he said.

Under the new arrangement, to be operative from October, Tower will retain overall responsibility for investor funds, but Russell will have the power to determine the underlying managers used in each of the asset classes covered by Tower’s offerings.

Schoenheimer believes the investment market will see more of these types of partnerships in the future.

“Having a group like Tower, which is in touch with their customers and what they want, and a group like Russell, which can then translate what the customer wants into sourcing the best of breed fund managers and package it up so it can be delivered to the customer, is a model that we will see more and more, rather than the people with the customers trying to do all of the work in-house,” he said.