During 2008, Mercer advised on 676 manager searches across the world, representing $93 billion in assets placed, according to a news release. Globally, searches ran at lower levels than in previous years although assets placed reached their highest levels yet.
In the U.S., search activity was up as plan sponsors reacted to the large losses in equity markets by reconsidering their policies and making some tactical decisions on rebalancing, as well as replacing managers who had performed exceptionally poorly, Mercer said. The most notable decreases in search activity were seen in the UK, Continental Europe and Australia where funds focused on strategy issues rather than manager changes and structures. In New Zealand the number of searches also dropped after a year of high levels brought on mainly by tax changes.
In the U.S. virtually every asset class experienced significant losses, yet search activity was fairly strong compared to 2007 (up to 123 from 110). Defined contribution (DC) searches (151) continued to outpace defined benefit (DB) searches (123), although the number of DB searches in 2008 declined from the previous year (170). The value of assets placed in DB searches continued to exceed the assets placed in DC searches.
With a total of 21 searches, global/international equity continued to be the most frequently sought asset class in both DC and DB plans in the U.S. Continued diversification, among equity styles and capitalizations, was also an apparent common denominator in both plan types, according to Mercer.
The number of Canadian equity searches increased in 2008 (32 to 38). However, they were overshadowed by the increase in amounts placed in non-domestic equity mandates, jumping from $1.8 billion to $2.7 billion in 2008. On the alternatives side, activity increased, with the most popular strategy being infrastructure, where a doubling of search activity was observed in 2008.
Globally, international equity (including all global, EAFE and other global ex domestic) remained the dominant investment manager search category, with 155 searches accounting for close to $23.5 billion in assets placed, up from $19.5 billion in 2007, according to Mercer's 2008 Global Manager Search Trends report. There has been a decline in domestic equity searches in Continental Europe and the U.K. , with combined figures dropping from $3.9 billion to $1.7 billion 2008, Mercer said in a news release.
Searches in real estate nearly halved from 62 in 2007 to 32 in 2008, however the amount placed went up slightly to $1.9 billion. The survey shows an overall decline in non-traditional search activity, though most of this is accounted for by a large decline in the number of global TAA/global macro searches in the U.K. . Of note is the global increase in activity in both private equity (up from 5 to 22 in 2008) and multi-strategy hedge funds (up from 9 to 20 in 2008).
Copies of Mercer's Manager Search Trends: 2008 Year-End Report cost $2,000 and can be purchased at www.mercer.com/managersearchtrends .
In 2008, 189 investment manager searches were conducted in the U.K., with total assets placed declining to $ 26.1 billion from $29.2 billion in 2007, according to the Mercer news release. As the market turmoil intensified, schemes became more focused on strategic issues than on manager structure/manager selection. Within the traditional arena, global equities (48 searches) and UK fixed income (41 searches) saw the most activity. The number of U.K. equity searches declined to just 17, from 27 in 2007 and 32 in 2006.
In the U.K., search activity in alternatives was lower than anticipated at the start of the year. The decline in activity was most notable in real estate (down to 7 from 25 in 2007) and non-traditional asset classes. The number of searches in global TAA/global macro and currency fell from 36 in 2007 to 10 in 2008. Contrary to this general trend, multi-strategy hedge funds witnessed a large pickup last year (6 searches in 2007 and 17 in 2008)
In the rest of Europe, the countries that showed the highest percentage fall in activity were Switzerland and Spain. Elsewhere, search activity remained at similar levels to 2007. The most common search category was balanced/multi-asset which covers most of the activity in Spain and Portugal. Within the traditional space, global equity and European fixed interest were the most popular search categories. The majority of the activity in alternatives took place in Germany, the announcement said.
In Asia, search activity increased slightly in 2008. The most common search category remained global/international equities with 14 searches and $3.9 billion placed. The search for hedge funds/absolute return funds is also still growing, up to 13 searches from 7 in 2007.
Search activity in Australia declined to 61 in 2008 from 82 in 2007; however, the amount of assets placed increased from $10.1 billion to $15.2 billion. During the year, equity searches accounted for the lion's share of activity in 2008 with Australian equity searches leading the pack (18 searches, $3.6 billion placed).
Global equity searches came second in the number of searches (12), but surpassed the Australia total in the amount of assets placed ($6.7 billion). Of all equity searches, there were several that were focused on socially responsible investment (SRI).
For New Zealand, 2008 saw a return to normal search levels (26) after a particularly busy year in 2007 (50), driven primarily by tax changes, Mercer said. Searches in 2008 were dominated by global rather than domestic asset class searches, with global fixed income making up the highest percentage of assets placed ($97 million). Searches in the alternative asset sector were relatively subdued in 2008.
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