Russell Investments: Tacoma's global high-roller
Having outgrown its headquarters building, the company needs new digs for 1,100 employees. A bigger issue, though, is the possibility Russell has outgrown Tacoma. State and local politicians are scrambling to keep the 72-year-old company there, but Russell's employees live in a big world.
On the announcement in December that the global financial services company Russell Investments might relocate its headquarters, Tacoma officials launched a pitched battle to keep this cash cow in their city. "Project Destiny," as the effort is called, is at once low-key and dramatic.
Last week, Gov. Chris Gregoire pledged $700,000 in unclaimed lottery winnings to help Project Destiny. Earlier this year, Pierce County announced it will purchase the Tacoma Narrows Airport from the city of Tacoma for $5 million, with plans to woo corporate clients. County Executive John Ladenburg assured a Gig Harbor Chamber of Commerce audience that corporate jets are "quieter." Ladenburg himself has said, and reports in the press concur, that Russell leaders think this is a swell idea.
Ladenburg also made reference to a new eco-friendly headquarters office complex for Russell. Russell managers are keen on redesigning their trading floor, which they argue is now configured in a way that obscures the view one trader has of another because the elevator shaft is positioned in the center of the building. The company projects it will need six times the space provided by its current digs. However, building footprints in downtown Tacoma being what they are, accommodating Russell's space requirements necessitates lifting the building height restrictions currently in place.
With a headquarters staff of 1,100, they've outgrown their downtown building on A Street. The real question is: Have they outgrown Tacoma itself?
Russell Investments was founded in 1936 by Frank Russell, but the family member credited with taking a small, Tacoma-based brokerage house and turning it into a successful multinational investment firm is his grandson, George Russell.
It's a story Russell people know well: In 1969, George Russell called on nationwide retailer J.C. Penney to sell them on his company's new service: money-manager evaluation. He won J.C. Penney as a client, and the retail giant is still a client. With that pitch, Russell pioneered a new industry. Instead of focusing on managing money, Russell would focus on evaluating the people who manage money.
Russell added a valued service to their clients by acting as pension fund consultants who could identify money managers with the best performance. Says Dan Inveen, a former Russell researcher: "From there, Russell developed the concept of indexes and multi-manager investing. Russell began many years before those practices gained widespread acceptance."
In 1984, Russell created the equity indexes — that's not a typo; the company prefers to use "indexes" rather than "indices." The Russell 2000 is familiar to most investors and seems to give people the impression that Russell focuses on small market capitalization. (Capitalization is a measure of the size of a public company based on its share price multiplied by the number of outstanding shares.) However, what Russell does is look at the 3,000 largest companies, culling them into the Russell 3000, and then skims the top one thousand from those to get the Russell 1000 (large-cap), with the bottom making up the Russell 2000. While Russell has stiff competition in the index realm — Morningstar, Standard & Poor's, Dow Jones Industrial Average — its U.S. family of indexes is used to benchmark more assets than all other U.S. equity indexes combined.
Russell lists all companies in descending order by market capitalization. The rationale behind indexing by market capitalization is that it conveys an accurate public opinion of a company's worth: You buy the stock, and you literally buy into the company. The Russell 3000 captures nearly all of the U.S. equity market. Since 2002, the Russell 2000 has risen 141 percent, ahead of Standard & Poor's 500 index by 58 percentage points and double the Dow Jones Industrial Average.
Russell moved into the arena of global equity indexes in 2007 by partnering with the oldest brokerage firm in Japan, Nomura Securities, founded in 1925. The global indexes capture 11,000 stocks worldwide, representing 98 percent of the global equity market.
It's this status as a global company that should make Tacoma nervous. The same year that George Russell sold J.C. Penney on the pension consulting concept, he opened a second office in New York. Ten years later, he opened a London office. Russell Investments now does business in 44 countries, with offices in London, Paris, Amsterdam, Johannesburg, Sydney, Melbourne, Auckland, Singapore, Hong Kong, Tokyo, Toronto, San Francisco, and New York. Its world headquarters address seems modest in comparison. In 1988, instead of relocating to New York or building in Seattle, George Russell and his wife, Jane, designed a headquarters building themselves in their hometown, Tacoma. Of the pending relocation decision, George Russell, now chairman emeritus, says he has no say.
With Seattle's South Lake Union neighborhood on the table as a possible relocation site, it remains to be seen whether Russell leadership will be swayed into thinking that more impressive corporate digs would better fit the Russell of the future. It's a future that might take Russell far from its pension-fund roots.
Like what you just read? Support high quality local journalism by becoming a member of Crosscut.com today!
Comments:
Posted Thu, Mar 6, 9:29 a.m. inappropriate
Well written: As a business profile, but I'll tell you Albers still has a long ways to go to get credibility with me - perhaps no better than Crosscut itself.
It is quite true that Russel is as important to Tacoma as Boeing is to Washington. It is also true that Tacoma is not a global city - it is Chicago, not NYC, or perhaps more aptly, it is Brooklyn, not Manhattan.
The way this plays out will be one of the key indicators of regionalism in Western Washington, perhaps as important as the future of Sound Transit. It might well make sense for Russell to move to Seattle - that decision is theirs - though I will certainly be among those hoping, and working, to keep them here.
However it also might make sense to 'reform' government bringing South King County more into the Pierce County 'family' of communities. The biggest factor for that would be the 'natural' advantages of associating with the Port of Tacoma. Both Pierce County and South King County are bedroom communities for workers in Seattle and the Eastside so that citizen basis makes sense too. One way to do that would be to re-organize Wash DOT into regions making sense within the current planning and financing framework - perhaps RTID South and North Districts?
Certainly Weyerhauser's move to Federal Way was not a disaster for Tacoma - certainly nowhere near the Greater Seattle areas loss of Boeing HQ to Chicago.
Weyerhauser is still quite important to Tacoma's economy. Chihuly and Russell are perhaps the two big international players, and Mount Rainier, well Mount Rainier will never fade as an international tourist attraction. Gig Harbor is emerging as the destination of choice for travellers wanting a Puget Sound Experience with a bit closer urban ties than that found in the San Juan's.
Tacoma's strongest competive advantage in the region will be in competing with Seattle for the support services needed for a global powerhouse of a City, perhaps the equal of both Hollywood and Manhattan. Who knows, perhaps we can even compete for the legal support services needed by the HONEST corporations of Seattle.
-Douglas Tooley
Lincoln, Tacoma
Posted Thu, Mar 6, 12:01 p.m. inappropriate
Tacoma smelly?: I think Tacoma has an excellent chance to retain the Russell Company. Tacoma is not the downtrodden rustbelt-like city it might have been 20 years ago, and it certainly is not the barren cultural wasteland as articulated by one of the interviewees.
Posted Thu, Mar 6, 12:44 p.m. inappropriate
RE: Tacoma smelly?: Tacoma is much better than it was 20 years ago in virtually every respect. But the aroma, diminished as it is, still wafts over downtown when the wind's blowing from the wrong direction, and it still limits the city's growth potential and its quality of life.
Posted Thu, Mar 6, 12:58 p.m. inappropriate
Pretty fair assessment: I started reading this article with some trepidation. Seattle publications are usually not very fair-minded when it comes to writing about Tacoma. I was relieved to find this article to be pretty fair, especially when it came to describing the +/- of Tacoma living for bright young adults.
Here's how I'd summarize it:
If you're intensely urban-minded and really into pro sports, clubbing or otherwise enjoying a bustling nightlife, and bragging about where you live, Tacoma falls short.
If you're into being able to afford a really nice house in a good neighborhood (or investing in a fixer-upper or an up-and-coming neighborhood), and if you're into accessible natural and historic-architectural beauty both from within the city and within a 2-hour drive of the city, Tacoma wins easily.
Ultimately, people from all over the greater Puget Sound region should be cheering on Tacoma. Here's why: TRAFFIC. There aren't too many good jobs in Tacoma, but there are lots more Tacoma residents who want and deserve good jobs, so they pack the freeways every weekday. Then we have to spend billions of dollars helping them make that commute. Seattle's hoarding of good jobs isn't good for the environment, for the economy, or for the people of the whole region.
Posted Thu, Mar 6, 1:31 p.m. inappropriate
RE: Pretty fair assessment: Excellent gloss on the subject. Unless you're really into the urban hipster life style, as a place to live, King County pretty roundly sucks. Housing prices through the roof, more laws, more hassle. I went to school with a guy named Dan Inveen. Don't know if this is the same one, but if he is, we grew up about a mile apart, rode the same school bus, etc. Like him, I commute from Pierce County to the East Side because I like where I work and I love where I live. I look at the houses near my office and I wouldn't pay $100,000 for one, yet they're going for half a million. There aren't many tech jobs in Tacoma yet, and that's puzzling. (I worked for a couple years for a tech firm in Tacoma, and it wasn't worth the shorter commute because their management team was like a big dysfunctional family and employees were considered expenses rather than assets. I'd rather drive.) I can't help but think that more firms are going to come to the South Sound because it's just a lot nicer place to live, unless you measure your personal fulfillment by how much you paid for your Sunday morning hangover.