According to a report by Mercer IC that tracks manager searches conducted by the company, it advised 748 manager searches in 2005, accounting for $76 billion in assets placed. This was down slightly from 764 searches conducted in 2004, which accounted for $84.2 billion.
The report tracks the manager search process when institutional investors such as pension funds look to hire an investment manager to manage a portfolio of assets on its behalf.
Reduced DC Activity
According to the report the US saw a dip in search activity in 2005, which was mainly due to reduced defined contribution search activity, which fell from 441 searches in 2004 to 164 in 2005.International mandates continued to be the most frequently sought asset class in both DC and DB plans in the US.
International equity overtook US equity as the most popular single product category among Mercer IC’s clients for 2005, with 164 searches accounting for nearly $16 billion, or 21% of total assets placed. US equity followed with 75 searches and more than $7.4 billion worth of assets placed, or 9.8% of the total.
The number of searches for DB managers fell in the US, from 158 in 2004 to 117 in 2005. However the assets placed climbed slightly from $8.8 billion in 2004 to nearly $9.2 billion in 2005.
International mandates continued to be the most frequently sought asset class in both DC and DB plans in the US.
“We believe the reason for this downturn is the delayed impact of the mutual fund late-trading and market-timing scandals of 2003, which prompted an unusual level of search activity in 2004,” said John Frede, Americas Head of Research at Mercer IC, in a release. He expects DC search activity to hold steady and that regulations meant to curb future scandals will prevent the need for manager replacement searches.
In Canada, search activity in 2005 was virtually stagnant, with the greatest variation from 2004 being the type of searches, which was partly due to the removal of foreign content restrictions early in 2005 resulted in an increase in the activity of non-domestic asset class searches, particularly with respect to US equity searches.
Mercer IC conducted 101 searches in Canada representing a total of $4.3 billion in assets, with the most popular search mandates being Canada balanced and Canada equity, which accounted for $288 million and $682 million, respectively.
The report shows high growth in the European region (excluding the UK) with 152 searches conducted, up from 78 in 2004.
In this region assets placed rose slightly, from $22.7 billion in 2004 to $25.2 billion in 2005, with multi-asset and global equity showing the most search activity. For the UK the number of searches totaled 229, with $29.9 billion in assets.
Ireland had the most search activity in the region last year, which according to the report, was driven by changes in asset allocation and by the trend away from single-manager balanced structures toward those with global equity exposure.
Nearly 230 searches were conducted within the UK, compared to 241 in 2004, with total assets placed at $29.9 billion. Global equity represented 42 of the searches and nearly $6.2 billion in placed assets, an increase from 2004.
To get a copy of the report go here .