GLOBAL - Manager search activity increased in 2010 with emerging markets and alternative asset classes receiving most interest, research by Mercer reveals.
Its 2010 Global Manager Search Trends report showed Mercer advised on 940 searches across the world last year, up 14% from 826 in 2009. This increase is a continuation of the strong rebound from 2008 (676 searches), when investors were busy focusing on strategic decisions following the financial crisis, the consultant said.
The 2010 searches represent $95.6bn in assets placed by 361 institutional investors. Global/international equity remained the most popular search category (177 searches in 2010, down from 191 in 2009), though more assets were placed in fixed income ($13.5bn compared to $11.2bn in global/international equity).
In 2010, searches ran higher across a range of alternative asset classes compared with 2009, the data shows. Interest in property has rebounded significantly with real estate totalling 67 searches in 2009 and 72 in 2010. Mercer said this reflects, in part, the relative cheapness of the asset class following a significant correction during the crash.
Growing interest in commodities (from 7 to 20 searches), infrastructure (from 14 to 17 searches) and multi-strategy hedge funds (from 24 to 31) was also evident. Emerging market searches, both in equity and debt, saw a substantial increase, reflecting a desire on the part of investors to capture the strong economic growth in some Asian and other developing economies, Mercer added. Emerging market equity searches rose from 21 in 2009 to 50 in 2010 and emerging market debt searches increased from 4 to 45.
Andy Barber, global director of manager research at Mercer said: "Interest in non-traditional asset classes continues to grow as investors look to increase diversification and take advantage of perceived attractive beta and alpha generation opportunities. The trend away from traditional investment began some time ago and while events such as the global financial crisis led to a slowing of the trend, it is one we expect to continue.
"That said, traditional equity and bond mandates are likely to remain the dominant areas of search activity for the foreseeable future."
UK and Europe
Following the surge of search activity in 2009, UK investors focused on maintaining the new mandates through 2010, leading to a significant reduction in searches and assets placed. Manager searches were down from 245 in 2009 to 196 in 2010, and assets placed dropped from $41.9bn to $23.9bn.
The strongest UK trend of 2010 was the growing interest in emerging market equity and debt with total searches rising from one equity search in 2009 to 36 (23 debt and 13 equity). The weight towards debt may reflect growing concern at the high valuation of some emerging equity markets, the report suggests. The move away from domestic equities continued with only four searches in 2010 compared to eight in 2009 and 17 in 2008. Searches for global and UK fixed income also dropped considerably, from 45 to 8 and 33 to 10 respectively.
Search activity across the rest of Europe increased from 126 to 168, with assets placed surging from $10bn in 2009 to $35bn. A dramatic increase in Germany accounted for more than 50% of the searches in the region, particularly in emerging market strategies, both fixed income and equity. Search activity increased in Switzerland and Sweden; however France, Ireland and the Netherlands saw a decline.
In the US, DB searches ran at slightly lower levels compared with the previous year - down from 126 in 2009 to 118. DC searches were also down on the previous year (from 173 in 2009 to 162), but continued to outpace DB searches. The most significant US trend, driven by the desire to further diversify portfolios, was the change in focus from fixed income to alternative asset classes and equities, Mercer said. The total number of global/international equity searches (54) in both DB and DC plans continued to increase (44 in 2009, 39 in 2008).
In Canada search activity ran at higher levels than last year (147, up from 137), however asset placements have dropped from $6.7bn to $4.3bn. DC accounted for most of the increase in searches, particularly within the traditional balanced, equity and fixed income classes. Global/international equity remains the most popular category (47 searches), followed by Canadian equities (32) and balanced/multi-asset (27).
Searches in Asia increased from 40 in 2009 to 70 in 2010, however assets placed dropped significantly from $19.2bn to $4.8bn. The most popular search category remained global/international equity (11 searches), but the bulk of assets were placed in real estate ($1.2bn). Some Asian investors are increasingly worried about the impact of future increases in inflation, which has resulted in searches for global inflation-linked bonds (three searches).
Search activity in Australia almost doubled from 120 in 2009 to 216 in 2010 and there was a sharp rise in assets placed - from $7.7bn to $14.9bn. Notable increases came through growing interest in real estate (up from eight searches in 2009 to 31) and emerging market equities (up from two to seven) as well as in niche areas such as commodities (two searches in 2010). Global/international and domestic equity searches also saw a significant increase as investors sought to diversify their portfolios. Global/international equity searches increased from 23 in 2009 to 39 in 2010 and domestic equity from 24 to 44.
In New Zealand, manager search activity dropped from 32 in 2009 to 25 in 2010, though assets placed increased from $483m to $842m. Searches in the traditional sectors dominated with New Zealand equities (11) and global fixed income (eight) the most popular asset classes.
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