Wamco loses Russell Bond Fund as row heats up over probe of star traders

The $2.2 billion Russell Strategic Bond Fund is reducing its portion of assets allocated to Wamco to “zero,” according to a filing Friday. Russell expects to “formally terminate” Wamco’s role in the fund by the end of the year, pending board approval.

Wamco, which has been losing clients for years, has been hit by a new wave of investor buyouts after it revealed last month that Leech, its co-chief investment officer, was facing possible enforcement action from the Securities and Exchange Commission US Furniture and Stocks. Leech has taken an immediate leave of absence and the uncertainty over his status is a “considerable concern”, pensions consultant NEPC said following the announcement.

A spokesman for Wamco, a unit of Franklin Resources Inc., declined to comment on Russell’s decision.

SEI Investments Management Group disclosed on Friday that it is withdrawing Wamco as subadviser for six mutual funds, including SIIT Core Fixed Income, SIMT Core Fixed Income, New Covenant Income, Catholic Values ​​Fixed Income, Short Duration Municipal and SEI Multi-Asset Income . Assets that Wamco had been managing will be allocated to other existing sub-advisers.

Russell, which uses multiple subadvisers for some of its funds, evaluates factors such as performance, investment staff and market conditions when evaluating whether to hire or fire a third-party manager, a company spokesman said in an emailed statement. by e-mail.

“The change is the result of Russell Investments’ continued and robust approach to manager selection,” the spokesman said. “This includes the ongoing evaluation of all managers in our portfolios against our stable managers with a good share.”

Russell himself oversaw almost half of the strategic bond fund’s assets at mid-year, with the rest allocated to Wamco and two other firms. A fact sheet shows Wamco’s target allocation was 11 percent — the lowest weighting of the three sub-advisers — suggesting it managed more than $200 million of the fund’s assets.

Struggles for funds

The bond fund has struggled of late, with an average annual loss of about 0.5% over the past five years, ranking it near the bottom among rival funds that follow a comparable strategy. The fund’s total assets have almost halved over this period.

In 2022, when the fund was down about 14%, Russell attributed the performance in part to Wamco’s bets on lower-grade bonds and the direction of interest rates. The fund made a big loss on Treasury futures that year, according to its filings, as did Leech’s Western Macro Opportunities Fund, which is now closed.

Wamco’s Macro Opportunities strategy generated net outflows of $900 million last month, reducing assets to $1.1 billion, according to a statement this week. The buybacks also left the firm’s flagship Core Plus fund with less than $15 billion.

At the firm level, Wamco managed $377 billion at the end of last month, up slightly from July, as gains and market inflows into cash management products such as money market funds offset net outflows on long term of 7.7 billion dollars.

(Updates with SEI funds in the fifth paragraph.)