By Courtney Darby
The Russell Real Estate Securities Fund (Class S) is atypical in its management style, using a multi-manager approach in which its three fund managers operate independently of each other with the collective goal of generating strong returns and building portfolio diversification. The fund's managers were hand picked to offer complementary styles to the fund's broad market strategy. According to Bruce Eidelson, who oversees the fund and its managers, having three independent managers is a positive asset that adds another layer of diversification to this dedicated real estate fund.
"We select managers to pick the individual stocks so the sector weights in the portfolio are really a reflection of their collective views," Eidelson says. "The managers don't interact with one another on their decisions, so we think one of the advantages is that we get broader diversification and complementary styles, which helps to smooth performance out in different investment
environments."
Matt Troxell of AEW Management and Advisors, L.P., Joe Rodriguez of INVESCO Institutional and Karen Knudson of RREEF America LLC each have a percentage of the portfolio they are responsible for maintaining, according to Eidelson. (John Robertson will assume Knudson's role once she leaves RREEF at the end of the year.) Eidelson says that each manager has his/her own preferences and management style.
More than 90 percent of the fund's assets are allocated to REITs, with the goal of delivering performance in excess of the NAREIT Equity REIT Index and above average consistent returns relative to its peer group of mutual funds.
Given the fund's asset allocation, it's no secret that Eidelson is a fan of REITs. This UCLA graduate continues to be bullish on the overall REIT market's performance over the next 12 months.
"As long as interest rates stay at or near where they are, I think REITs will continue to do well because they are still a yield oriented component of the market," Eidelson says. "The best environment for REITs would be steady job growth and stabilizing interest rates."
Eidelson also favors regional mall and lodging REITs over the next 12 months.
"We expect strong growth going forward for malls, as these companies have performed exceptionally well over the past couple of years. The lodging sector is typically an economically sensitive sector, but it looks like the economy is improving and the sector will benefit from that," Eidelson says.
Eidelson says he not only favors the REIT sector because of the diversification it provides for the portfolio, but he also finds the sector challenging.
"It is a more dynamic sector compared to the private sector, simply because it is part of the public market," Eidelson says. "You have to understand the drivers [of the REIT market] and particularly short-term performance. Much of my time is spent explaining to investors what is driving the REIT
market (whether that be property fundamentals, interest rates, etc.)."
Eidelson has amassed a broad array of real estate experience during his 20 years in the industry (the last five with Russell Investment Management Co.). He says he never had one specific career path in mind, but instead stayed true to his interest in real estate and allowed that to guide his job opportunities. Eidelson dabbled in real estate consulting, developing and accounting, to name a few. His position at Institutional Property Consultants gave him a broad perspective in advising pension funds on constructing their real estate portfolios and also served as a natural segue into becoming portfolio manager of the Russell Real Estate Securities Fund. For Eidelson, being portfolio manager merges several of his interests in real estate into one job.
"I always knew I had an interest in the financial aspect of real estate and how capital is used in the sector," Eidelson says. "I always wanted to align those interests and in hindsight it has worked out very well."
