(February 14, 2013) — Assets outsourced by institutional investors to consultant and fund manager Mercer rocketed last year, the firm announced today.
In Europe, assets outsourced to Mercer grew by 67%, from $10.5 billion to $17.5 billion over the 12 month period. Globally, assets increased by almost a third, by $16.8 billion from $53 billion to $69.8 billion.
Just over 41% of new asset growth came from Europe last year, with the United Kingdom, Nordics, and Ireland awarding the most new assets.
“Equity market volatility continues, interest rates are low, there is uncertainty in the Eurozone, and returns from alternatives are disparate,” said Mick Dempsey, Mercer’s head of fiduciary management in Europe. “Against this background, institutions are looking for services that enable them to quickly adjust their portfolio in response to market changes while ensuring that investment governance remains strong.”
The approach is gathering supporters within institutional investment. Last summer, Mercer rival Towers Watson announced it was managing over $58 billion in assets for its fiduciary, or outsourcing clients.
A restructure last year at Mercer saw a structure similar to that of a fund manager form within the traditionally investment consulting-focused firm. In January 2012, President and Group Executive of Investments Phil De Cristo said Mercer would continue to offer investment consulting, but its clients had demanded it move “beyond investment consulting and to assume a greater role in helping them manage their investment programmes”.
In July, a survey by Russell Investments, which offers consulting, asset management, and outsourcing services, said almost 40% of pension fund trustees and other institutional investors that do not currently outsource will consider using a fiduciary manager within the next 12 months.
However, asset managers have feared consultants – and other providers – are taking over their pitch. Fund managers have launched their own products that involve elements of the role traditionally played by consultants, such as multi-asset and smart beta portfolios to match portfolio holdings with liabilities.
This week, Towers Watson said its clients had committed $20 billion to smart beta strategies, with $5 billion being allocated last year.
Related content: Are Daggers Out Between Consultants and Asset Managers?
To read aiCIO’s 2013 survey on outsourcing, see the January/February edition published later this month.