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Impact Investing

IPE special report May 2018

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Clients put $10bn into currency overlay - Mercer

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GLOBAL - Mercer Investment Consulting says its clients put $10bn (€7.7bn) into currency overlay mandates in 2004.

“Currency overlay attracted the greatest increase in interest from Mercer’s clients in 2004, with 28 searches and US$10bn worth of assets placed,” the consulting firm said.

“This was a dramatic increase from 2003, when Mercer advised on just eight currency overlay searches accounting for $2.7bn worth of assets.”

Greenwich Associates last week said that with volumes up almost 25% last year, foreign exchange is evolving into a separate asset class for “real money” investors.

“UK pension funds, in particular, showed more interest in currency overlay, hiring managers both to reduce currency risk and to add value through active currency management,” said Bill Muysken, Mercer’s global head of research.

The total value of assets placed through the firm’s manager search activity increased by 27% to a new high of $84.4bn last year. It advised on 764 searches during the year.

Muysken added that the growth in total assets placed was driven by increased search activity among Mercer’s national government fund clients.

“The number of national government-related funds we advise globally has now reached double figures, and some of them placed very large mandates with managers during 2004.”

US equity was the most popular category for the firm’s clients, with 90 searches accounting for $6.1bn in assets.

Mercer carried out 29 hedge fund of fund searches, up from 18 in 2003. Assets placed in hedge fund of funds grew to $1.8bn from 0.3bn.

In the UK, 241 searches were conducted, compared to 222 in 2003, with total assets placed at $36.1bn. In the rest of Europe, 78 searches were carried out, compared to 68 in 2003.

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