Survey: Consultants Foresee Heightened Focus on Alts, Emerging Markets, LDI Strategies

(April 10, 2011) — Findings from Casey Quirk & Associates and eVestment Alliance’s annual survey of investment consultants in the US and Canada reveals that alternatives, emerging markets, and liability-driven investment (LDI) strategies will dominate search activity this year.

According to the survey, consultants expect the majority of searches to focus on hedge funds, reflecting the growing importance of the asset class for institutional investors. Additionally, the study shows that half of those surveyed expect an increase in institutional interest in inflation hedging strategies this year.

“One of the more interesting findings in this year’s consultant survey is the rising interest in private equity and real assets,” notes Casey Quirk Partner Yariv Itah in a statement. “Institutional investors increasingly manage toward outcomes rather than just excess return, and they want asset managers who can use illiquid investments to mitigate inflation risk and manage liabilities.”

Furthermore, the study reveals that more than one-third of investment consultants surveyed anticipate a boost in liability driven investing (LDI) mandates in 2011, with three-fifths of consultants expecting moderate or strong bond search activity this year. The greater attention to LDI  corresponds with previous research from MetLife that showed underfunded liabilities is a top concern among US corporate plan sponsors, with the response being an LDI strategy.

“A sluggish growth in search activity is to be expected, as many in the institutional investment industry emerge from the policy rebalancing many conducted during late 2009 and 2010, following the global financial crisis,” said eVestment Principal and Founder Heath Wilson in a statement. “eVestment and Casey Quirk hope that the latest search expectations provide a clear picture on how North American institutional investors should adapt to the changing investment frameworks and increasingly competitive environment.”

The fifth annual poll conducted by Casey Quirk and eVestment consisted of responses from 55 consultants in the US and Canada with $10.4 trillion in assets under advisement.