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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.

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.

 

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