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Mercer’s implemented consulting business has won more than $1 billion in new mandates from smaller institutional investors aiming to outsource their investment management obligations as the financial crisis intensified. Compared with the $3 billion Mercer’s implemented business garnered in the past five years, the mandates represent an accelerated growth of funds under management, the vast majority of which came from non-superannuation institutions, such as universities, foundations and charities.

Gary Burke, head of Mercer’s investment management business, said this new flow of business for implemented consultants was brought on by the financial crisis. “In some areas, such as hedge funds and corporate credit, less sophisticated investors tend to not fully understand the risks in their portfolios,” Burke said. The business growth coincided with Mercer’s investments business, Mercer Global Investments (MGI), undertaking a strategic review and beginning to implement changes to its $12 billion multi-manager portfolio that will determine its strategy for the coming years.

Burke said the multimanager recently completed a strategic review and was implementing the outcomes, which will steer portfolios through the remainder of 2009 and beyond. Burke said the implementation of the portfolio changes could be delayed for some time due to the liquidity profile of asset classes. “We may not want to be in unlisted property at current valuations, and will buy into it when it’s prudent to do so,” he said. He said MGI had also questioned the appeal of splitting fixed income allocations between Australian and offshore markets, and indicated that the manager preferred making large investments in sovereign and corporate credit.

MGI doubted whether domestic listed property trusts warranted the status of an asset class, and would continue to prefer single-manager hedge funds over funds-of-funds. “We’ve never been a fan of HFoFs. They lack transparency – we couldn’t analyse the underlying strategies – and have fee duplication,” Burke said. “We felt a number of hedge funds were heavily sold, and were selling skill they never possessed.” MGI would continue to allocate predominantly to active managers, although some sectors, such as Australian LPTs, would justify a passive mandate.

Mercer’s implemented consulting business has won more than $1 billion in new mandates from smaller institutional investors aiming to outsource their investment management obligations as the financial crisis intensified. Compared with the $3 billion Mercer’s implemented business garnered in the past five years, the mandates represent an accelerated growth of funds under management, the vast majority of which came from non-superannuation institutions, such as universities, foundations and charities.

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