GLOBAL - Mercer is preparing to launch a web-based capital market modelling tool that will allow pension fund clients to self-generate strategic asset allocations and construct theoretical portfolios.
Mercer Portfolio Structuring Tool (PST) will be made available to institutional clients on a subscription-fee basis. PST builds on Mercer’s internal modelling capabilities, and will allow clients, particularly pension funds, to model theoretical capital markets, said Danny Quant, a principal at Mercer.
“The PST system is a modelling system to determine efficient frontiers based on underlying assumptions for equity markets, bond markets, property markets and so on and so forth,” Quant said. "Depending on the user’s parameters, the optimiser identifies an efficient frontier for risk.”
PST will further allow users to take the modelled strategic asset allocations and “overlay” them with references to potential managers, their investment styles and potential fees charged for alpha generation, Quant said.
PST began as an internal tool for Mercer consultants, but the firm decided to develop an internet-based platform to permit more sophisticated pension fund clients to access it for a subscription fee.
“It was developed as an internal Mercer tool,” Quant said. “The more we looked at [PST], the more we thought of organisations that have highly skilled internal people who don’t rely wholly on consultants and are skilled enough to use the tools we use internally.”
Although Mercer has not yet set PST’s subscription fee, there has been interest in the toolkit from pension funds in the US and superannuation funds in Australia. At this time, PST in the UK is “for internal use”, said Quant, adding: “Clients are thinking about whether they should take the tool and use it.”
The development of Mercer PST mirrors that of Mercer’s Global Investment Manager Database (GIMD), which began as an internal research and ratings database that collected manager questionnaire responses and internal Mercer ratings, but led to a subscription-based web platform that permits clients to access the research and determine manager selection lists.
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