Managing the Shift from Pensions to 401k with Zach Buchwald

Barry speaks with Zach Buchwald, Chief Executive Officer and Chairman of Russell Investments about his career in investing. They discuss the creation of the smart beta philosophy. They also discuss the transition from pensions to 401ks for retirees, and the way the onus for investing has moved to the individual. Zach also describes his proposal for a program, that is now in effect, for a $1000 to every newborn who's parents open a count to show the importance of compounding. See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  At Brookfield, we believe you can own wealth that's measured in generations. Because true ownership looks beyond today and beyond cycles. For 125 years, we've built long-term wealth through expertise, discipline, and a clear vision for the future. Providing investors access to alternative strategies built for what's next. Brookfield. Own what's next. Learn more at Brookfield.com/own. This is not an offer to sell or investment advice. Investing involves risks, including loss of capital. Past performance is not indicative nor a guarantee of future results. Please review performance and offering materials before investing.

• 0:38Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices.

• 1:21Speaker 01

  But according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

• 2:03Speaker 01

  Bloomberg Audio Studios, podcasts, radio, news.

• 2:11Speaker 01

  This is

• 2:12Barry Ritholtz?

  Masters in Business with Barry Ritholtz on Bloomberg Radio.

• 2:18Barry Ritholtz?

  This week on the podcast, I have yet another extra special guest. Zach Buckwald is Chairman and Chief Executive Officer at Russell Investments. They run about $370 billion. I found this to be a fascinating conversation. Russell has been at the forefront of a number of really interesting innovations. Indexing and outsourced CIO and smart beta, they were way ahead of the rest of the investment world. Now they're putting together really interesting active portfolios, including private investments. They work with both wealth clients as well as institutions.

• 2:58Barry Ritholtz?

  You may not know Zach's name, but he's got an absolutely fascinating background at BlackRock, Morgan Stanley and Lehman Brothers. I thought this conversation was fascinating and I think you will also. With no further ado, my conversation with Russell Investments, Zach Buchwald. Zach Buchwald, welcome to Bloomberg.

• 3:18Speaker 03

  Delighted to be here, Barry. Thanks for having me.

• 3:20Barry Ritholtz?

  Thank you so much for joining us. I spoke to your predecessor about three years ago, right after the pandemic, but let's start talking a little bit about your background. Undergraduate bachelor's degree at Harvard, what were you studying there?

• 3:34Speaker 03

  I studied English, so this was not on the docket that I was going to have a career in finance.

• 3:38Barry Ritholtz?

  Not, not the plan, huh? So, so you come out of school in 96. What was your first gig?

• 3:44Speaker 03

  So out of school, I applied to law school, not sort of knowing where I was going. And I, and I decided to have a little break before I, before I went back to school. And I got recruited by Lehman Brothers. So I spent two years working in structured finance at Lehman Brothers. And it became apparent to me right away, I didn't want to become a corporate lawyer because I worked with lawyers and that was, that was not the job for me. But I had a knack for it. I enjoyed it. I always liked math, even though I was an English major. And you know, you can find other ways to put your writing and your reading acumen to work as well.

• 4:14Barry Ritholtz?

  And I'm going to say late 1990s, nobody had any clue what was coming a decade later.

• 4:19Speaker 03

  Not at all. Now Lehman Brothers was a great place to start my career. But after two years, I went to Morgan Stanley and that that's how I think of the beginning of my career because I spent 10 years at Morgan Stanley. I was very invested in the firm and the firm was was invested in me. I learned about, you know, the capital markets, top to bottom, and I had a career there. That took me from, you know, from a starting associate role to running a business that became the CLO business, which now is like a real, you know, really important part of capital markets.

• 4:43Barry Ritholtz?

  What were your titles there? What did you do there?

• 4:45Speaker 03

  Yeah, well, I started as an associate within within fixed income. I, you know, I was in sales, I was in trading, I was in structuring. I always worked within the credit derivative space. And then ultimately, credit derivatives started getting wrapped up in different ways. And I and I worked on the CLO platform and Morgan Stanley had a leading CLO platform that by the end of my my time there, I ran. And that was about, you know, I think about the role that CLOs play in the, you know, in the in the markets today. It's an enormous origination function that helps, you know, finance a lot of corporate America.

• 5:17Barry Ritholtz?

  John Mack was CEO at the time, is that right?

• 5:19Speaker 03

  So I was there for Phil Purcell and I was there for John Mack.

• 5:22Barry Ritholtz?

  Wow, those are two legends in in the industry. What inspired you to head over to BlackRock?

• 5:30Speaker 03

  I went to BlackRock with the guy that I was working for at Morgan Stanley, and we created a business that was essentially an advisory practice. This was 2008 and BlackRock was hired to work on a lot of the situations that were, you know, at the at the start of the crisis. So we worked with the Federal Reserve, we worked with the Treasury, a lot of the big financial institutions that had, you know, problematic portfolios. And BlackRock was very well positioned as a buy-side firm, as a company that sort of hadn't underwritten a lot of like the problematic derivative.

• 5:57Barry Ritholtz?

  I mean, did they, did they even have an investing banking division back then?

• 6:01Speaker 03

  No, we, I mean, we called it advisory, but essentially it was like an investment banking function. I mean, it was really consultative, providing advice, running portfolio analytics, thinking about, you know, if you can separate like the liquidity crisis from the actual credit risk and and and, you know, sort of the expected cash flows on these securities, what could you expect to get back? And we, you know, we created a roadmap for for the government on how to invest in these securities that they took away, you know, that they essentially backstopped from these big organizations and tried to create a roadmap to bring them back to par, to repay all the taxpayers with interest and and in all. Almost every respect over time, the government was successful in doing that. And BlackRock really played a very special role in creating those roadmaps. And you know, it wasn't what I would think of as like a highly profitable business.

• 6:44Speaker 03

  But in terms like the aura that was created around BlackRock as being like a solutions provider, you know, sort of a force for good in the world, that's what we did. And it was a, it was a, it was a great role for me.

• 6:54Barry Ritholtz?

  I recall that era, that BlackRock essentially had become the street's bond desk. Like every brokerage firm used to have a fairly substantial bond desk. And it seemed like BlackRock has just sucked up all that paper and, and all those traders.

• 7:12Speaker 03

  Well, that sounds like an HR strategy. And I don't, I don't know that I had any, anything, any part of that. But, but there was a lot of talent for sure. And there continues to be a lot of talent, you know, some of those, you know, some of the folks that worked on those, you know, on those assignments are essentially running BlackRock now. And it was, you know, it was the consultative nature of thinking about, you know, thinking about the challenges, how we can create solutions to those challenges, thinking about the aspirations and the ambitions. And, you know, that doesn't just apply to workout situations. That applies to all, you know, kind of all the clients. And it's something that I've tried to import, you know, into my current role at Russell.

• 7:44Barry Ritholtz?

  So you're there for 15 years. Eventually you become head of their institutional business. That's, that's a $2 trillion silo. And you also helped establish BlackRock Retirement Solutions. Explain what these groups do.

• 7:59Speaker 03

  Yeah, so after, after the consulting practice, I went on to run the insurance business at BlackRock. That was a $200 billion business at the time, a little sleepy, not, you know, what I would say is like a growth center. And, and it was housed with, the business itself was housed with true insurance experts, asset liability experts, people who really understood like the nuts and bolts of insurance companies. And I, I did not have an insurance background. And, you know, for the first year, I had an insurance guy sort of stapled to me every time I went to a client, make sure I didn't get out over my skis. But, you know, but you know, this being an outsider sometimes can actually really, you know, help you think, think externally about some of the things that might be impacting the clients, the industry, the sector, the business itself.

• 8:42Speaker 03

  Early on, when I was in that role, we ran an analysis of the whole US insurance industry. Every company that was bigger than a billion dollars of general account assets. And we asked ourselves the question, what are some of the external factors that could impact these companies that they might not be expecting or prepared for? And where could BlackRock play a role in helping them deal with those kinds of challenges? And we came up with seven situations, Barry, that we thought were going to have seismic type impacts on the companies, and four of them happened. And in three of those cases, BlackRock went on to play a really big role and run the general accounts. And that was more than $100 billion of assets, and we put on another $100 billion along the way. So that was the case where the business started growing very meaningfully. And I think BlackRock paid a lot of attention to that and realized, gee, we could play

• 9:27Speaker 03

  a bigger role with these insurance companies. They're going to do a lot more interesting things than just invest in high-quality fixed income over time. You also had some interesting stuff happening with Apollo and Athene. They were remaking the model a little bit. And BlackRock pays a lot of attention to what's going on in the outside world, and we grew the business.

• 9:46Barry Ritholtz?

  To say the very least, what are they, $12, $13 trillion now in assets?

• 9:50Speaker 03

  It's a good business.

• 9:51Barry Ritholtz?

  To say the very least. So 10 years at Morgan Stanley, 15 years at BlackRock. What lessons did you take from those experiences to Russell Investments?

• 10:00Speaker 03

  Yeah, well, first and foremost, it's all about the client. And if you lose sight of that, understanding what the client is dealing with, their challenges, their ambitions, their aspirations, being a consultative provider. If you start from a push out, like here are the products that I have, here are the things that I've done before, it almost never works. And that's not the age that we're living in today. The age that we're living in is, how can I help you achieve the outcomes that you're trying to get to? How can I anticipate some of the challenges that you're going to experience? How can I help you learn from some of the things that I've seen in the sector or the industry? And you start from there, and it builds a foundation with the client that is irreplaceable. So that was one really important learning. Now, I came into Russell.

• 10:44Speaker 03

  Because Russell had, like, first of all, it's a 90-year legacy. Thank you for starting with that.

• 10:49Barry Ritholtz?

  1936, that's a, that's a, you're coming up on a century soon.

• 10:52Speaker 03

  Yeah, exactly. I'm really proud to run, I'm the eighth CEO, by the way, of, in 90 years of Russell Investments. I mean, that's, so for a US asset manager, that's old. And I think about the things that Russell has done in that time, Barry. I mean, it's been a real innovator and category creator. Everybody knows the Russell indexes, which were, you know, sort of cultivated and innovated in all sorts of cool ways. And we all have it in our pensions, in our 401Ks. You know, Russell was the original pension investment consultant. We created that category. Russell was the original OCIO, and we're still a leader in OCIO. These are, these are really, you know, sort of important categories that have a big impact on, on the investment ecosystem. And what was, what was special to me about Russell, and the reason I wanted to join,

• 11:35Speaker 03

  is Russell's approach to doing all of these solutions is its entirely open architecture. So the view is we build and implement portfolios at Russell, which is, you know, something I worked on at BlackRock, and to some extent, and we're at Stanley, too. But the idea is we use best-of-breed managers and strategies from around the whole investment universe. So if I put together an OCIO portfolio at Russell, I'm building, you know, fixed income, you know, the best quality fixed income managers, the best private assets managers, the best cash, and so on, and best index products, you know, we can kind of, it's, we can kind of go everywhere within the ecosystem. And that was a model that I was very excited about because it became more about, like, thinking through the lens of what the client is looking to achieve, and how can I use all of the tools and the ingredients available, as opposed to sort of a set,

• 12:19Speaker 03

  you know, set of tools that I, that I had at hand from the company that I worked for.

• 12:23Barry Ritholtz?

  Really interesting. We're going to talk about pensions, OCI, we're going to talk about a little later. I didn't realize this till I started doing my homework. Russell is effectively credited with inventing smart beta.

• 12:37Barry Ritholtz?

  I mean, who knew that? I think of a couple of other firms as taking the leadership in that recently. But 40 years ago, you guys were on the, on the cutting edge of that. What is it like running a firm that has a near-century-long legacy? How does that affect how you think about risks and opportunities?

• 12:59Speaker 03

  Yeah, I mean, the legacy is a wonderful thing, but you know, you can't rest, like, we all know we can't rest on our laurels. It's, you know, the job for me is to make sure that I'm taking sort of the best parts of the history and the legacy, the innovative spirit, all these cool things that we've done, and then evolving them for the world that we're in today. Our mainline business, we have, we have sort of two central businesses. It's OCIO and it's model portfolios that we do on the retail side, which is essentially the same kind of ideas of the institutional business, building great portfolios and implementing them. 90% of our business is those, falls into those two categories. What I need to do today is make sure that I'm using all of the tools available. So as the market moves from, you know, active products to passive products, as the market

• 13:41Speaker 03

  starts integrating private assets with public assets, all of that is part of our portfolio today. And, and so the goal, you know, as the leader, is to make sure that the strategy is incorporating, we're open architecture, it's truly incorporating the entire ecosystem into the, into what we build for our clients.

• 13:57Barry Ritholtz?

  I, I want to get your feedback on a quote of yours I found in my, in my homework. Quote, "Financial security is a central challenge for this industry." How did your experiences at BlackRock, at Morgan Stanley, and way back when at Lehman Brothers, how did it affect your, your concept of financial security?

• 14:18Speaker 03

  Financial security and retirement security especially, took me a little bit of time to hone in on, Barry. I mean, I think back to my years at Morgan Stanley and, you know, the job there was very much about sort of like finding the arbitrage in the markets. It's where can we make money as a sales and trading function? And we help clients along the way, you know, by delivering the products and services that they want. But first and foremost, it was about the investment bank. And, and that changed for me. I had a, I had a review with my boss at the time, and she said to me something that she meant as a compliment. She said to me, "Zach, you can really smell the money." And I went away and that was not the legacy that I wanted for my career.

• 15:00Speaker 03

  And, you know, I moved to BlackRock shortly after that where I was helping, you know, the government, the taxpayers, deal with like really critical issues, like really big thorny problems that were going to have an impact on, you know, on the quality of life of the people in this, in this country. And it, it was a complete reset of my perspective. You know, now, we build portfolios at Russell, but, you know, if I'm working for a pension or 401k or an insurance company, at the end of the day, I'm serving individuals. I'm helping them, and we don't lose sight of that, I'm helping them have a secure retirement. Now, by the way, they have to do their part too, because it's also about, you know, saving early, contributing, making sure that you're, you know, learning about the, the plan and making the right decisions.

• 15:43Speaker 03

  But the role that we play within the industry is a make or break in terms of whether they're able to, whether they're able to achieve that. Now, you also have something going on in the background that's, that's going to have a very big impact in the next couple of decades with retirees in America. And, and that is that really the risk has shifted now. The retirement security risk has shifted from, you know, organizations like the companies and the government.

• 16:07Barry Ritholtz?

  Companies in defined benefits to define contributions.

• 16:10Speaker 03

  To define contribution, right. So the standard model, the standard pension model is shifting to the 401k. And today, still about half of retirees have access to a pension and that plus, plus social security more or less gets the job done. But in another decade, it's going to be less than a third, and in another two decades, it's going to be very little at all. So that means that now the 401k is the staple that's going to, you know, result in a secure, comfortable retirement or, or not. And, you know, the, the, the big challenge with a 401k is that the risk of saving, investing, and also decumulation, taking that pot of money, knowing how long, you know, the longevity risk, knowing how, thinking about how long you're going to live and how to allot it over time, all of that risk will now be borne by the individual.

• 16:54Speaker 03

  And we have not fully processed that in, you know, within, within the country, that this is a crisis that's coming, that people aren't prepared to, to own that responsibility. And the system today isn't set up in such a way that sort of the decisions are very easy to, you know, to make. The, the onus is really still on the individual.

• 17:12Barry Ritholtz?

  So that's really fascinating. How does that affect? What you see within your role as CEO at Russell Investments?

• 17:19Speaker 03

  Yeah, well, thanks Barry. Our whole mission is built around helping people achieve financial security and we do that on the institutional side by partnering with corporate sponsors and helping to ensure that the plans that they're putting in place and the role that they play through matching, through providing lifetime income, whatever the set of benefits are, is going to be, is going to serve the participants in the way that we think is going to help them have, retire with confidence and with security. But as the, you know, as the machine shifts and it moves more toward a 401k and then, you know, a lot of folks end up with a nest egg that they have to manage on their own, the goal is to make sure that on the wealth side, we also have sort of the right kinds of products and services and solutions that help them, you know, understand income, help them understand decumulation, help them get the right diversification, help them get

• 18:04Speaker 03

  fair fees. I mean, the goal is to make sure that we're, we're really delivering sort of a set of products and services that's going to allow them to live the kind of retirement that they all, they'll hope for.

• 18:13Barry Ritholtz?

  Really, really interesting. So whenever I talk to people about Russell, everybody knows the Russell 2000. The question is, what does Russell do? How do they make money on, they, they must do something more than the Russell 2000. Tell us a little bit about the different business lines at Russell Investments.

• 18:31Speaker 03

  Sure. So the index business is now owned by London Stock Exchange and they, they do a magnificent job with it and we still have a little bit of the, you know, the aura. Every time I'm in the elevator, I see the advertisements for Russell and I think I didn't have to pay for that ad. We get, we get the benefit. The business is predominantly an, it's an active asset management business and, and we really have one main function, Barry. It's about building and implementing great portfolios and we do it for institutional clients and we do it for retail clients. So building the portfolios is really about sort of, you know, it's portfolio construction, it's strategies and managers. For 90 years, we've done manager research at, at Russell. We have, you know, a huge team of people. Now it's augmented by AI and technology, helping us look at 16,000 different managers

• 19:15Speaker 03

  and figuring out, we invest with about 225 of them, you know, figuring out which managers and strategies we think make sense in the different portfolios we create. And then the implementation. Is one of the coolest parts because that's we actually do the investing on behalf of the managers. They typically give us model portfolios and and then all the things around the portfolio that can, you know, be very incremental. It's the the transitions, it's the hedging, completion exercise, completion mandates, overlays. And, you know, those things can be alpha generative. They can be very important for risk management. You can add a values overlay for for clients. And so it's a it's a full portfolio delivery at the end of the day.

• 19:56Barry Ritholtz?

  Coming up, we continue our conversation with Zach Buffwald, chairman and CEO of Russell Investments, discussing exactly what Russell Investments does for its clients. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

• 20:20Speaker 00

  At Brookfield, we believe you can own wealth that's measured in generations. Because true ownership looks beyond today and beyond cycles. For 125 years, we've built long term wealth through expertise, discipline, and a clear vision for the future, providing investors access to alternative strategies built for what's next. Brookfield. Own what's next. Learn more at Brookfield.com/own. This is not an offer to sell or investment advice. Investing involves risks, including loss of capital. Past performance is not indicative nor a guarantee of future results. Please review performance and offering materials before investing.

• 20:58Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs. And hands on experience matters more to recruiters than advanced degrees. With the company looking for people with raw, innate, and Intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices.

• 21:42Speaker 01

  But according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company. And Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates quote "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute, brought to you by ChatGPT. Get started at ChatGPT.com.

• 22:24Barry Ritholtz?

  I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Zach Buckwald. He's chairman and chief executive officer of Russell Investments. The firm was founded in 1936 and runs about $370 billion. Zach joined Russell in 2023, coming from his previous career at BlackRock. So you mentioned you're researching 16,000 different managers, and internally you're generating just a fire hose of data. How do you analyze that? What value is that data to the firm?

• 23:01Speaker 03

  Yeah, I mean, the data is everything. And we do have a historical trove of data, but it changes quickly. You think about how quickly the investment ecosystem evolves. And managers have strategies that make sense on one day, and then things change, and those strategies don't make sense. So it really has to stay current, even though we certainly value the historical data and performance and use it. We start with 16,000 and the first layer is largely technology driven. So it's, you know, we have huge feeds that take into, you know, that take in and analyze all of the available information that's provided to us by managers directly and also that we can find out there in the, in the public domain.

• 23:46Barry Ritholtz?

  When you say managers, are these mutual fund managers, ETF managers, private managers, or all the above?

• 23:53Speaker 03

  It's, it's all of the above. I mean, typically because of our size and scale, we don't, we don't invest in a ton of direct, like, shared products. We do much more sort of separate accounts and, but we do invest in mutual funds. We do invest in ETFs or index products where, where that makes sense and that can help, you know, drive down cost or, you know, help with diversification. But, but the managers is for the, the active strategies and active represents, I'm going to guess probably 85% of the assets in, that we manage overall. Remember, we're using different active strategies as the building blocks to create these portfolios. So predominantly it's not Russell managed, although, you know, we can talk about the smart beta that you, you brought up.

• 24:35Speaker 03

  Predominantly, these are externally managed strategies that we bring together and then we collapse the whole thing together in one portfolio and we look enterprise wide because you might have, you know, three active equity managers and they're not paying attention to what the other ones are doing. And so you can end up with outsized positions or underweights. You can end up with, you know, people on opposite sides of trades and we look to, you know, to correct or make adjustments where it makes sense.

• 25:00Barry Ritholtz?

  So you guys were very innovative and helped create the concept of outsourced chief investment officer, OCIOs. Tell us a little bit about that business line. Who are the clients and, and how much assets does that run?

• 25:15Speaker 03

  Yeah, so OCIO represents the lion's share of the 370 billion that, that we manage and it's a fast growing segment, not just at Russell, but it's growing because a lot of companies are, are outsourcing their pensions or their 401Ks to, you know, folks that live and breathe the markets and that think about retirement security like we do all, all day long. So, you know, a typical day at Bloomberg might have one top story about a big You know, big US corporate that's chosen to outsource their retirement portfolio. Now, we work with a lot of in-house teams as well. We help by bringing in, you know, any of those implementation services like transitions and hedging. We do that for a lot of, a lot of companies that have internal teams.

• 25:53Speaker 03

  But sometimes sponsors decide to, you know, to hire retirement experts to, to run their, to run their retirement portfolio. And that's when they would bring in an outsourced chief investment officer. We're a top five provider and it's some of the big, you know, the other big asset managers that, that also provide that. We're the ones who do it with an open architecture framework. So the goal is not to, you know, have Russell run the whole portfolio. It's to bring in best of breed managers and to bring those together.

• 26:18Barry Ritholtz?

  Huh, really, really kind of interesting. When you talk about hedging, are you hedging equity, hedging fixed income? What is the hedging business like?

• 26:27Speaker 03

  Yeah, it can be all of the above. Also, a foreign, you know, foreign currency. You know, it can be hedging individual sectors. You might have a sponsor that's in the technology sector and they feel like they already have enough exposure to technology. And so you can, you know, make some adjustments to the portfolio that way. You can also build in a values orientation for, you know, organizations that have a particular, you know, view of the world that they want to express in their investment portfolios.

• 26:53Barry Ritholtz?

  So let's talk a little bit about Smart Beta, which Russell helped pioneer in 1985. Way before your time or my time for that matter. Is this still something that's a key part of what you're doing?

• 27:05Speaker 03

  So we still have a strong footprint within systematic Berry and, you know, Russell manages on average between 10 and 20% of the portfolios that, that we look after and systematic typically is within that, that 10 to 20%. We use it not to make, you know, credit decisions or stock picking decisions. Like that's not, that's not our game. That's why we hire external managers who are, you know, true experts in that. We use it to like round out the portfolio, to make adjustments, to make sure that the portfolio is complying with why the client hired us or whatever their investment, you know, their stated investment strategy says. But Smart Beta is, you know, one of the many places where Russell was an innovator and, you know, these things can sort of take on a life of their own as the, as the industry adopts those practices.

• 27:48Barry Ritholtz?

  We mentioned artificial intelligence earlier. Tell us how you're using AI in either risk management, portfolio construction, or just data analytics.

• 27:57Speaker 03

  So Barry, we have a list this long of sort of, you know, desired use cases that we're working on for AI. And I think we're still in early innings here. But the kinds of things that we use AI for today very effectively are more task oriented. You know, we have it fill out our RFPs. We have it build pitch decks. We have, actually, we use AI to, you know, read 500-page filings, you know, which we used to have a human being do back in the day. And it's very effective at that. The real goal for, you know, for this company is that I want AI to actually help us with investment insights, with manager research insights. That's going to actually drive performance at the end of the day. And I think we still have a fair amount of, we're making progress, but I think we still have a fair amount of work before, before that happens.

• 28:41Speaker 03

  But, you know, that's the view where having, you know, having a portfolio where we look after 16,000 different strategies and managers, we're starting from a place where we, like as you said, we have troves of information, of historical information that we're relying on and that we're using AI to sort of help build out that framework.

• 29:01Barry Ritholtz?

  So I'm always fascinated by, you know, the old joke is no one's ever seen a bad back test. And AI and those sort of things are only capable of looking at what's already occurred and built into all of those back tests and to some degree built in to AI is that the future is going to resemble the past. How do you navigate around that? Because sometimes the future doesn't resemble the past. Just look at AI and how it's changing so many aspects of various businesses.

• 29:36Speaker 03

  Yeah. Well, that's a place where, you know, I'm still pretty optimistic that there's an enormous amount of value creation to come, Barry. Because the, you know, what we've seen from AI so far, at least how it's, how it's shown up in terms of, you know, in the market performance, has been almost entirely harbored in the technology sector. It's where, you know, sort of where AI exists. What we haven't seen yet is all the other sectors that we know are going to be sort of enormously impacted by the proper use of AI, the creative and innovative use of AI. So you know, you see a little bit of it in like healthcare and life sciences, but you know, logistics and shipping and consumer goods and in investments, asset management,

• 30:19Speaker 03

  they're all going to get transformed by AI because it's changing things. And you know, this is where I'm really optimistic that we have a lot more room to run in the markets today is because you're still not seeing like all the, you know, the potential and the benefits of AI showing up in some of these, you know, what we think of as sectors that are peripheral to technology. But you know, in truth, technology is like critical to how we, you know, how we all exist.

• 30:44Barry Ritholtz?

  Makes, makes a lot of sense. Let's talk about private markets. How can Russell Investments help their clients access private markets between AI and privates? Those are probably the two hottest topics we've been talking about this year.

• 30:59Speaker 03

  So privates represents about 7% of the portfolios that we manage. It's heavier in, in the institutional portfolios. It's lighter right now within wealth portfolios. There's a lot more growth that's, that's going to happen, especially in wealth. I think the average wealth client has something like one or 2% of their portfolio outside of their real estate holdings, about one or 2% in privates. And that number is going to grow and should grow, right? Because this is a really important source of, you know, return and risk diversification. And if you rely on the historical precedence, it's been an enormous outperformer writ large. And so, you know, kind of delivering, you know, access is a, it's a very important, you know, function that we do at Russell, but also

• 31:41Speaker 03

  that we work with our financial advisor partners to, to figure out the best ways. Cause it's, you know, how you deliver privates to, to institutional investors is, is different, right? There's tax considerations and reporting considerations, liquidity considerations that all need to be considered with, with individuals. So we're trying to do this, you know, really judiciously. Within wealth portfolios, wealthy people, wealthy families, there's a lot of room to run here. You know, I'm being extra cautious when I think about, you know, sort of 401ks or, you know, 401k graduates, you know, middle-class people, nest eggs. Cause that's where, you know, I think about. Are these appropriate investments? Do they help with financial security? Can you get your money back when you need it? Are the fees fair and appropriate?

• 32:26Speaker 03

  And so I think you need to be extra careful with the true working people, working families, and their retirement nest eggs. But wealth writ large, there's a ton of room for private markets.

• 32:39Barry Ritholtz?

  So you mentioned 7%. Where could this possibly go? Is this 10%, 15%, 20%? I've heard people say 60, 40 is out. It's now 50, 30, 20, or whatever the numbers add up to.

• 32:53Speaker 03

  I don't know where it gets to. It's certainly going to be north of 7%. I think you have to think not only about what's appropriate for the portfolios. Listen, if you do a backward-looking analysis of private equity and private credit, outside of specific real estate investments that people choose themselves, those are like the two biggest food groups. If you run an analysis of what those investments looked like over the last 20 years, Barry, it's going to be different than what you're going to get in the next 20 years for a lot of reasons. But I'll tell you, from my personal perspective, right now, in the last two years, my vet's office has been bought by private equity. My landscaper, my garbage collection, my dentist, they're all owned by private equity

• 33:38Speaker 03

  now. And they're doing these roll-ups, and there's lots of efficiencies to be created on bringing these practices together. But that's a pretty different investment than buying a company and making a company better and selling that company, which historically is where private equity made its name and its reputation and the return stream that we've seen. So another thing I think about is, how am I going to make sure that the risk and return profiles I'm putting into these portfolios, that we can reasonably predict what they're going to look like and that we can manage them appropriately, given that the asset pools might look a little different than what we were investing in 10 years ago?

• 34:19Barry Ritholtz?

  Really, really interesting. So let's talk a little bit about some of the things that are going on in the market today. Fee compression has been a giant factor, really, since the financial crisis. You recently decided to reduce some of the fees on your flagship fixed income products. Tell us a little bit about what drove your decision and what are you thinking about in terms of fees generally?

• 34:46Speaker 03

  I mean, the governing precept, Barry, is always to make sure we're providing value to the clients. And, you know, we do that by charging a fair and appropriate fee for what it is we're doing. If I'm going to focus on anything, it's less about what's the fee that I can charge and more about making sure that I'm invaluable to these clients and that we're really, you know, helping them achieve their goals. When you, the truth is, when you do a great job for the client, the fee almost becomes not an issue. Now, having said that, we have some businesses that are scaled businesses and that I compete with, you know, with other good providers and I have to make sure that we're staying competitive. So we're not in any way immune to fee compression. But, you know, but if you can provide a really good value proposition, it's not such a big deal.

• 35:30Barry Ritholtz?

  So this has been an ongoing factor in the industry, particularly for active managers, and Russell is primarily an active manager. Are you seeing any changes in this trend globally? I mean, it started very much in the United States with entities like BlackRock and especially Vanguard. You're a global firm. What does this look like overseas?

• 35:55Speaker 03

  Yeah, fee compression in our space is, you know, it is, comes through in different ways globally. OCIO is the place where we've been sort of most susceptible to, you know, to fee compression, Barry. And, you know, if I think about who we compete against, the landscape has changed for us over the last 10 years. You know, 10 years ago, I competed largely against like the consultant, the traditional consultants. And we had a very different offering. We actually implemented the portfolio. We weren't just doing manager research sort of on paper. We were actually trading the portfolio and, you know, doing the risk management and the overlays and the completions, things that were a very big value add. And we were unique in that respect. And then along came the really big asset managers that saw OCIO in part as sort of

• 36:37Speaker 03

  a distribution function. You know, if I can deliver the entire portfolio, I can put a lot of my own underlying products into that portfolio. And by the way, that can be a great business for you if you have

• 36:47Barry Ritholtz?

  But that's a closed architecture. You guys run a very open architecture.

• 36:51Speaker 03

  We run a completely open architecture and we're unique in that it's true open architecture. Eighty plus percent and sometimes 100% of the assets come from third-party managers. But we still have to compete against organizations that are running their own version, which might be closed or semi-closed. And you know, if you have a whole lot of underlying products you're putting into the portfolio, it gives you a lot of leeway to change the fee or to compress the fee at the OCIO level because you're making money in all sorts of other ways. Russell doesn't do that. So it does mean that we were susceptible to some of the fee compression and our fees have narrowed. But the way I see the solution here is just to make sure that the value proposition that we're offering, the way we go about building

• 37:31Speaker 03

  an OCIO, the costs that it takes, the human capital that's required. You know, we put over $100 million into our technology system that allows us to build these open architecture portfolios. When clients understand what it is that they get from us, paying a slightly higher fee doesn't seem to be a big deal.

• 37:50Barry Ritholtz?

  What about the private markets that we're looking at? We were talking about private equity, private credit. First, is it possible that those sort of things can be indexed? And then second, they've always been pricier than public markets. Are we starting to see any fee compression along those lines?

• 38:08Speaker 03

  Yeah. So we haven't seen a ton of fee compression. I mean, those are cases where I think the value proposition is crystal clear. And you know, the high-performing managers can charge higher fees or substantial fees because they've really delivered. And you know, in general, they continue to deliver. I think if they stop delivering and we start seeing what look more like public markets performance or even weak public markets performance, it's going to be much harder for them to charge those fees. But that hasn't happened yet, you know, especially within private credit and private equity.

• 38:42Speaker 03

  There's been, you know, real outperformance, especially at the top of the heap versus the public market, so it becomes easier to justify those fees.

• 38:49Barry Ritholtz?

  Makes a lot of sense. So let's venture into the world of public policy a little bit. You've proposed national account programs to help young people start investing early. The most recent big bill that passed in this administration has these accounts for babies. Every kid that's going to be born is going to get, what is it, 1,500 or 3,000 dollars? I don't know what number.

• 39:13Speaker 03

  Thousand dollars.

• 39:14Barry Ritholtz?

  A thousand dollars. All right, better than nothing, but where do you see these sort of programs going? And if you start investing at age one day, what potential compounding can we see 50, 75, 100 years later?

• 39:31Speaker 03

  Now you're really talking my language. When Trump was elected, I wrote a piece that we put into Barron's, that Barron's published, saying that we should give a thousand dollars to every kid in America and open an investment account and let them actually learn about the power of compounding, because it's different when you actually own the assets. And, you know, when you give people an investment account, you can find lots of ways to create some education, you know, investment education that goes along with it.

• 39:53Barry Ritholtz?

  And let me just interrupt you, because it sounds like a lot of money. There are 3 million kids born a year. It's 3 billion dollars, which to a 31 trillion dollar economy and a 6 or 7 trillion dollar government spend is a rounding error.

• 40:09Speaker 03

  It's nothing in the grand scheme of things. And, you know, you know you're on to something, because it got, actually got criticized by both the right and the left. And the right said, oh, this is another entitlement program. Anyway, we put this thing into Barron's, and to my surprise and delight, it ended up in the big, beautiful bill, and it actually got, it actually passed.

• 40:27Barry Ritholtz?

  Passed and funded, right.

• 40:28Speaker 03

  It became legislation. And, you know, Treasury is working hard now, thinking through, you know, the implementation, and we're helping along the way. It's an awesome program, because fundamentally, what it does is it makes investing universal. You know, all of these families in the United States that think that investing is not for them, or they've never had any exposure to it, and that's, by the way, most of America.

• 40:51Barry Ritholtz?

  Right.

• 40:52Speaker 03

  Now, to the extent they have, you know, have a kid, they are going to have an investment account that, that's, you know, there is a... There is a thousand dollars to kickstart it from the government, but there's going to be lots of avenues for families to make continued contributions, for employers to make contributions, for philanthropies to make contributions over time on hopefully a tax advantaged basis. And folks are going to see the way compounding really works. So it's not the $1,000 contribution, which, as you said, is kind of a drop in the bucket, at least as a burden on society. It's the, you know, what can you pull together from all of the different constituents that are going to want to contribute to a program like this? So we're really excited.

• 41:36Speaker 03

  And, you know, I think that ultimately, I hope this will dovetail with retirement security. You know, you said it when you asked what can happen in 50 or 75 years? I think initially, you know, the thought is these might help fund college education. And by the way, with a little bit of contributions on an ongoing basis, it will fund a college education with the compounding. But over time, there are six or seven of these programs, and eventually, you know, maybe we can pull them all together and create a national program that actually funds people's retirement.

• 42:08Barry Ritholtz?

  Coming up, we continue our conversation with Zach Buckwald. He's chairman and chief executive officer of Russell Investments, discussing the state of markets today. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

• 42:36Speaker 01

  This is the Bloomberg Tech Minute, brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk, and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs, and hands-on experience matters more to recruiters than advanced degrees. With the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices.

• 43:19Speaker 01

  But according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company. And Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates quote "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute, brought to you by ChatGPT. Get started at ChatGPT.com.

• 44:01Barry Ritholtz?

  I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Zach Buckwald. He's chairman and chief executive officer of Russell Investments. The firm was founded in 1936 and runs about $370 billion. Zach joined Russell in 2023, coming from his previous career at BlackRock. I'm a fan of using milestones as an excuse to give some sort of a gift. You can see sweet 16s, or kid turns 13, or whatever it is. Grandma and grandpa write a check and put it right into their account. Here's some Eli Lilly, or here's some whatever S and P 500.

• 44:45Barry Ritholtz?

  Knock yourself out, and that's going to just appreciate over the next, you know, X number of decades. It could really make a substantial difference in, in the retirement of people who have yet to even be born.

• 44:59Speaker 03

  It's absolutely true. And by the way, it's investing in, in the US stock market.

• 45:04Barry Ritholtz?

  Right. So I'm assuming the S and P 500 would count, and any of the Microsoft, or Lilly, or whatever, Apple, Amazon, whatever big tech company you're enthusiastic about, I would recommend a broader, more diversified approach than a single stock.

• 45:19Speaker 03

  Right.

• 45:20Barry Ritholtz?

  Lily cuz I just know a friend just put a bunch of Lily stock in his nephew's account. And I'm like, oh, what are you doing that for? He's like, just doing a transfer. It's tax free and I don't have to worry about it.

• 45:33Speaker 03

  Well, I'm not a stock picker, but Lily's a great company. Having diversified exposure in these in these accounts is the way to go. And, you know, listen, a generation ago, Barry, the version of that was not so much Lily stock. It was very typically a US Treasury bond. Right? That's what you got when you turned 13 or 16 or had that milestone birthday and a Treasury bond in the long term, you know, you'd rather be in the stock market. You get

• 45:59Barry Ritholtz?

  You don't want two, two and a half percent ahead of above inflation? That doesn't excite you?

• 46:04Speaker 03

  I'd rather, I'd rather have the long term return of the S and P for sure.

• 46:08Barry Ritholtz?

  Especially if it's a newborn or even a teenager, their investment window is 60, 70 years.

• 46:15Speaker 03

  That's, that's exactly right. And, and the trick here is you have to get people to actually understand because that 16 year old, when they're 22, they're going to get a job that's going to have a 401k and they have to understand why am I taking 6% out of my, you know, out of my paycheck when, you know, my starting salary might not even be enough to get, you know, to pay my rent and my other bills. Why would I want to do that? And, and they really, if they understand the power of compounding and the long term implications of that, they're gonna, they're gonna buy into it.

• 46:44Barry Ritholtz?

  I really didn't think about my 401k until I was in my 30s.

• 46:48Speaker 03

  Right.

• 46:48Barry Ritholtz?

  But if I actually had money put in account when I was born, by the time you're 25, you're going to see some impact from compounding.

• 46:57Speaker 03

  A hundred percent. Well, I'm not too worried about you, Barry.

• 47:00Barry Ritholtz?

  I'll, I'll be all right.

• 47:02Speaker 03

  You'll be, you'll be all right. But, you know, but think about all those folks that don't, you know, the average income in America is still $70,000, right? All those folks that don't have access to, to investments and they're not thinking about, am I going to be able to make my contribution at age 22? Because they're thinking about, can I

• 47:19Barry Ritholtz?

  Pay my rent.

• 47:19Speaker 03

  Afford to pay my rent.

• 47:20Barry Ritholtz?

  Right. The bottom half of the economic strata in this country, and we're having this conversation on election day

• 47:26Speaker 03

  Right.

• 47:27Barry Ritholtz?

  In New York where it looks like At least the leader up until today has been someone who describes themselves as a socialist and has made affordability their key campaign theme. This is going to be an ongoing issue, especially for the bottom half of earners and savers.

• 47:46Speaker 03

  That's right. We're not a political organization at Russell, but I do concur affordability is the issue. And I think it's not a left issue. I think it's an issue for everybody, almost everybody in this country, and we're going to be hearing a lot about it from all sides. You know, I wrote a piece after the baby accounts, which they call the Trump accounts, by the way. After that became part of the legislation, I wrote a piece that the Washington Post published that essentially described what these accounts are and the impact that it can have in terms of helping to educate our population about the power of investing and compounding. And it was very interesting to see the commentary. You know, when you publish something in the Journal or the Post, you get a lot of comments.

• 48:28Speaker 03

  And by and large, the vast majority of the comments said, why wouldn't you just write us a refund check? Which is what we got during COVID, by the way, like stimulus type checks. And it was the opposite of the point that I was trying to make.

• 48:41Barry Ritholtz?

  Right. We don't want you to spend this, we want you to save this.

• 48:43Speaker 03

  We want you to save it and to understand what the difference is from a savings account or a treasury bond versus investing it into the markets and getting to see long-term compounding. So it was, honestly, it was a little bit of a refresher for me that we have a lot of work to do to help people understand why a program like this can actually help them.

• 49:01Barry Ritholtz?

  As someone who's been writing in public for nearly 30 years, my best advice to you is simply never read the comments. There was a golden era of blogs in like the early to mid 2000s where the comments were these like fantastic communities. All of that has kind of migrated to Reddit. If you want to see lightly moderated, intelligent debates with some nonsense thrown in along the way, that's what's left of that sort of issue. I think even YouTube used to do a better job at moderating. The comments, the spam and the bots still slipping every now and then.

• 49:43Speaker 03

  It does give you a perspective on what's on people's minds, though, even though some of the comments are like unhinged.

• 49:49Barry Ritholtz?

  Right.

• 49:49Speaker 03

  You can tell like what's coming through, what are people's fears and worries and concerns if you can, if you can read it through the craziness.

• 49:57Barry Ritholtz?

  Yeah, you have to, you have to fight your way through it. It's kind of fascinating because I'm going to just digress for a moment. We all are subject to these cognitive errors and these behavioral biases and, and it very much shows up in, in people's portfolios and the decisions they make. I wake up on a day like today where NASDAQ is down one and a half percent. I know I'm going to see a bunch of emails. Ah, you told us to stay long and look, we're down one and a half percent today. I know I should have gotten out of the markets. What are you talking about? We're up 17% for the year and the NASDAQ's up 23%. This is the price of admission. You have to deal with some volatility.

• 50:42Speaker 03

  I mean, this is a place, by the way, where technology has not actually served people in their retirement portfolios. Because if you can pull up your phone and in three seconds, you know, you, you work as a teacher or a nurse or whatever, and you pull up your phone. And in three seconds, you see your portfolio is down one and a half percent and, and at some level it flips a switch and you think my portfolio is, is, is in trouble or I should sell. Like that's how you get to really bad decisions because we all, you know, we all know long-term, like if you're men, if you're.

• 51:09Barry Ritholtz?

  Do we all know that? Cause I'm not sure everybody does. And there's such an inherent bias towards action. Don't just sit there, do something.

• 51:18Speaker 03

  Right.

• 51:19Barry Ritholtz?

  Uh, that, that just seems to be human nature.

• 51:22Speaker 03

  It's anathema to how you're supposed to manage a retirement portfolio, though. You, you, by the way, you can make adjustments over, over time. But the goal is not to pull out when you think the market is going to be down. We all know that the bounce backs, by the way, happen faster and stronger than ever. I mean, you, you think about like what the bounce back looked like during the financial crisis or during the dot com bust. It took years to bounce back. And then you think about COVID or, or.

• 51:46Barry Ritholtz?

  Even April liberation day.

• 51:48Speaker 03

  Yeah, right. The bounce back happens. Yeah, almost instantly and stronger than before. So, you know, this is a case where the phone really does not help you, right? If you're going to make a decision to pull out because you see something going on in the markets on an off day. And, you know, as we're, as we're thinking through how to implement new programs like the Trump accounts, you know, my goal is you want to have like lots of transparency, but you don't want to make it easy for people to make bad decisions. You have to help them make good long-term decisions.

• 52:13Barry Ritholtz?

  A little bit of choice architecture that prevents those sort of things. Last question before I get to the standard questions we ask all of our guests. What do you think investors are not talking about, but perhaps should be? What, what are the important overlooked topics? Assets, geography, policy, whatever, that, that should be getting a little more following?

• 52:34Speaker 03

  Yeah. Well, Barry, I'm still really positive on, on AI and how much more room to run we have. You know, there's been so much to talk about, about how we haven't seen a broadening in the markets, you know, most of the value capture has happened within the, the technology industry. But, um, you know, I think every sector is going to be transformed, almost every sector, transformed by AI as much as it was by, by the internet. And we just haven't seen that come through yet, but I can tell you, every company that we invest in is thinking about this and working on it behind the scenes, even if it's not showing up yet in their, in their quarterly earnings reports, but it's all happening. And you're going to start seeing, by the way, you'll see winners and losers, both, you know, sort of specific companies and sectors.

• 53:17Speaker 03

  But there's going to be enormous amounts of efficiency gains and enormous amounts of, you know, sort of value creation that happens as a result of that. Now, I don't think it's going to be a straight line, but I do think it's coming shorter term rather than, rather than just longer term.

• 53:31Barry Ritholtz?

  Back in 2019, I interviewed Joe Davis, who's the chief economist at Vanguard.

• 53:36Speaker 03

  Yep.

• 53:36Barry Ritholtz?

  And they had this fascinating research report. Eventually it became a book. That all technological innovations take place in two phases. The first phase is kind of what we're experiencing right now in AI, which is wild prices, couple of, everybody knows a handful of companies, very boom, boom-like, some people have been, too many, a lot of people have been calling it a bubble. The second phase is where the value creation spreads out.

• 54:05Speaker 03

  That's right.

• 54:06Barry Ritholtz?

  To the rest of, rest of, rest of the market, rest of the industry, rest of the economy. I see it the same way you do.

• 54:13Speaker 03

  Right.

• 54:13Barry Ritholtz?

  This is just going to make all of us more efficient, more productive, more profitable.

• 54:17Speaker 03

  Right, that's exactly how I see this playing out. And you still have to pay attention because, you know, we all remember during the first, the first dot com phase, before every company started incorporating, you know, the internet into its business strategy and its operations, there were winners and there were losers. And, and the winners are still around and they're, you know, they essentially, you know, run global commerce today. And, and the losers went away. We're going to see some of that across sectors and, you know, that's something that investors need to pay close attention to, but, you know, writ large, I see a lot of value creation.

• 54:46Barry Ritholtz?

  I always like to hear that sort of stuff. So let's jump into our favorite questions that we ask all of our guests, starting with, tell us about your mentors who helped shape your career.

• 54:59Speaker 03

  Sure. I had a great mentor at BlackRock, a guy called Mark McCombe, who's a vice chairman of the company. And he put me into a couple of jobs and he nurtured me and supported me, but he also, he encouraged me to, you know, think like the outsider that I am. You know, when he put me into the insurance job without having an insurance background, he sort of said, bring, you know, bring all the capabilities and the perspective that you have from all the other things that you've done. And that, you know, really helped us, you know, think like an external provider and grow that business. By the way, I'm a, I'm, I'm a gay guy in finance, so I, I come at it from a, from an outsider's point of view, kind of looking in. And, and that has informed just about everything that I do at, you know, at Russell and, and

• 55:43Speaker 03

  before that, is thinking about. What's working, what isn't working, what do I think we might be able to do better? What have we not, you know, the question that you asked, what are people not talking about? What have we not asked about? And that's, you know, often my, my starting point. And I think if I had come in with the insider status, it would have been harder for me to take that perspective.

• 56:03Barry Ritholtz?

  That's really interesting. It's affected your perspective. You, you see the world both as a participant, but also an outsider.

• 56:11Speaker 03

  Yeah, that's right. And, you know, this is the first time I've been to Bloomberg in a, in a couple of years. But when I, when I took the job at, at Russell, even before I'd started, Bloomberg invited me to come speak at a conference and I was, you know, flattered and excited. And then I learned it was their diversity conference and I was the, the K C E. And, and I said, invite me back five times to talk about investing and retirement. And on the sixth time, I'll come talk about diversity.

• 56:35Barry Ritholtz?

  Huh, that's interesting. You know, in all the research we, we do, that did not come up in anything. It's not, it's not, uh, anything that bubbles up to the top of search. Um, although the old joke is if you, if you want to hide something, disclose it at the end of an hour long podcast. No, no one will hear it. But, uh, you know what it's like with all the YouTube. There's a, there's a drop off, but I always find that, that amusing. Let's talk about books. What are some of your favorites? What are you reading right now?

• 57:04Speaker 03

  Yeah. So I read a lot of fiction like, you know, Cormac McCarthy and Tyler. I'm reading a book called The Inheritance right now, which is, uh, like a family drama. Um, it's an escapist for me to get away from. I don't read a lot of finance books.

• 57:16Barry Ritholtz?

  Um, I'm the same way. Every now and then something will, you know, come across that I have to read that's finance related. Um, I have a big stack of fiction waiting to go on vacation with me next month. Let's talk about streaming. What are you watching or listening to? What's keeping you entertained? Either on Netflix or Amazon or whatever.

• 57:35Speaker 03

  Yeah, it's all toddler fare right now. I've got two, three year olds in the house. So we've got.

• 57:39Barry Ritholtz?

  Twins?

• 57:40Speaker 03

  Twins, yeah. It's, you know, all full-time Moana and Frozen and, uh, Daniel Tiger, Bubble Guppies, that sort of stuff.

• 57:47Barry Ritholtz?

  So, so, um, a lot of Moana. That's, uh, that's my idea of a nightmare. Just.

• 57:53Speaker 03

  Moana's pretty awesome, actually.

• 57:55Barry Ritholtz?

  The first three times you see it.

• 57:57Speaker 03

  The first three times and Frozen about twice.

• 58:00Barry Ritholtz?

  So our final two questions. What sort of advice would you give to a recent college grad interested in the career in either finance or investing? What would you tell them?

• 58:11Speaker 03

  Yeah. First, like, you know, be yourself. Like, we look for people at Russell from all different kinds of backgrounds, not just economics or finance backgrounds. Study what you want to study, do well, and, you know, be committed. But, you know, if you come at it from an outsider's, you know, station or point of view, embrace that. That's, you know, this is a world where we want folks that have different kinds of backgrounds and approaches. You know, I studied English, Barry, and one advantage that that actually gave me early on in my career was that I knew how to write. And, you know, you think about how much of our of our business is done through writing, through email and other ways. Everything you write, this is the advice now, everything you write is a reflection of you.

• 58:53Speaker 03

  And it can come up in, you know, something you put down on paper can come up again and again in all sorts of different ways. We all know that when you put something on the internet, it lives forever, truly. And, you know, your careers are long. You want to make sure that you're you're that you're properly reflecting the image that you want to create.

• 59:09Barry Ritholtz?

  Good advice. And our final question, by the way, that advice applies not only to writing.

• 59:15Speaker 03

  Yes.

• 59:16Barry Ritholtz?

  But my wife is a recently retired teacher, and she used to always warn the kids, all the stuff you're putting on Facebook and Instagram and TikTok, be aware, the colleges you're applying to are looking at that, and the jobs you're going to apply to, they're going to find that.

• 59:33Speaker 03

  That's right.

• 59:34Barry Ritholtz?

  Especially as you work your way up the up the corporate ladder, that stuff never goes away.

• 59:39Speaker 03

  That's right. Now, I'll give you a counterpoint. You know, we do 360 reviews at Russell, and sometimes, you know, people that are relatively new in their careers, 25 or 28-year-old, will write a review on somebody that they work for a couple of levels up that I that I read. And when I read a review that somebody has put a lot of thought into, and there's some, you know, praise and constructive criticism, how to make things better, I say to myself, this person would make a good manager. And I and I think about, how can we use them in other places in the company? So it's not just about, like, when you're writing about avoiding the things that you don't want out there in the world that can harm you. It's also making sure that you're putting the time and the effort into writing things that are really going to help you.

• 1:00:17Barry Ritholtz?

  Really, really interesting observation and good advice for people just entering the workforce. Final question, what do you know about the world of investing today that would have been useful 30 years ago when you were first getting started?

• 1:00:33Speaker 03

  I wish that 30 years ago, I had the confidence to know that, you know, that as an outsider, as a gay person, as an English major, someone coming at it from a different background, that I could make it in this business, that I didn't have to constantly think about how am I going to prove myself, but just by being a good productive contributor, by raising my hand, you know, and showing a little bit of ambition, by finding ways to help, that that can be enough. And sometimes, that being an outsider can actually be a good thing, you know, that it can help you re-underwrite situations and come at it from a different angle. And if you know that, and you're confident in it, and you use it to your advantage, it can really help you in your career.

• 1:01:17Speaker 03

  I figured that out along the way. It would have been helpful to know when I first started.

• 1:01:22Barry Ritholtz?

  Really fascinating stuff. Thank you, Zach, for being so generous with your time. We have been speaking with Zach Buchwald. He's chairman and chief executive officer of Russell Investments. If you enjoyed this conversation, check out any of the 589 we've done over the previous 11 years. You can find those at iTunes, Spotify, YouTube, Bloomberg, wherever you find your favorite podcasts. And be sure and check out my new book, How Not to Invest: The Ideas, Numbers, and Behavior That Destroy Wealth and How to Avoid Them, at your favorite bookstore. I would be remiss if I did not thank the crack team that helps put these conversations together.

• 1:02:04Barry Ritholtz?

  Each week, Alexis Noriega is my video producer, Sean Russo is my researcher, Anna Luke is my producer. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.

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