Alternatives manager searches were up 20% globally in 2007 compared to 2006, according to Mercer. Real estate in particular experienced increased popularity with 62 searches performed, up 12 from in 2006, although the amount placed remained virtually unchanged at $1.8 billion.
“Recent market turmoil is expected to further accelerate search activity as investors seek not only to further diversify but also, on an opportunistic basis, to identify investments with the potential for higher returns," said Andy Barber, global and European head of research.
During 2007, Mercer advised on 762 manager searches across the world, representing $76.3 billion in assets placed. Global equity continues to be the most popular product category amongst Mercer's clients, with 158 searches accounting for over $19.5 billion in assets placed, though this was down from $29 billion in 2006. Both the U.K. and the U.S. experienced a decline in domestic equity search activity.
U.S. search activity increased to 280 in 2007, from 267 searches in 2006, mainly because of a rise in the number of defined contribution searches from 157 to 170. The number of defined benefit and other searches was unchanged at 110, but the value of assets placed in DB searches continues to exceed those placed in DC searches. Jeff Gabrione, Mercer’s head of investment manager research for the Americas, said that in 2008, “there may be additional searches as plan sponsors increase the frequency of asset liability studies and adopt new methods of portfolio analysis and risk budgeting.”
Canada saw a considerable increase in activity in 2007, at 120 searches (up from 101 in 2006), led by global equity searches. While the number of Canadian equity searches increased, these were overshadowed by the combined growth of non-domestic equity mandates. Equity funds with an environmental, social and governance focus generated some interest.
“With some traditional managers now starting to consider the impact of climate change in their research, we expect to see more dialogue between plan sponsors and managers about the role of ESG issues on investment decisions,” said Gabrione.