Casey Foundation Could Axe Russell

Russell Investment Group, which in January lost its manager-of-managers mandate with the $2.3 billion Casey Family Programs, could soon be shown the door by the $675 million Marguerite Casey Foundation.

Russell Investment Group, which in January lost its manager-of-managers mandate with the $2.3 billion Casey Family Programs, could soon be shown the door by the $675 million Marguerite Casey Foundation. The sister foundations operate separately, although they have both hired Ennis Knupp + Associates this year and both boards want more control over their assets. The boards have only one overlapping member, Gary Severson, chairman of the Casey Family Programs board. Craig Neyman, director of finance and administration at Marguerite, said a decision will be reached about whether to retain Russell in the next three months. The two accounts are believed to be among Russell’s largest, if not the largest.

In addition, both plans are moving toward a more aggressive investment strategy. The Marguerite foundation has decided to make maiden allocations to private equity and real estate, while eliminating its 5% exposure to hedge funds, managed by Russell. The family fund plans to invest 5% in private equity and implement strategies to protect against inflation, said Gloria Reeg, investment committee chair.

When Family Programs broke ties with Russell, it retained some of the managers Russell had put in place, although Reeg declined to name them. Neyman declined to speculate on the future of Marguerite’s managers, but said that in a recent review Ennis Knupp did not recommend they be changed.

Reeg joined Family Programs’ board last year. She served as managing director of global consulting for Russell until 2002, when she left for Principal Global Investors. Family Programs has been adding other board members with investment experience and it will hire its first cio in the next three months. It is also shopping for an analyst. “Russell recognizes that foundations of all sizes ultimately need to assess their own capabilities and priorities and decide whether outsourcing or building capabilities in house is a better fit for their organization,” said Jennifer Tice, spokeswoman.

Regarding alternatives, Marguerite’s decision to invest in private equity and real estate follows a recently-completed asset allocation study by Ennis Knupp. The foundation is targeting 8% in real estate and 7% in private equity. “Private equity and real estate can be prime diversification tools and they should be in there,” Neyman noted. He expects the fund to start investing this year. “The fees included in hedge funds are a substantial hurdle in order to benefit from their returns,” he said. The board is also worried that there are too many hedge funds and too much money has been poured into the industry over the last several years.