Cross border mandates taking hold
European pension funds are using more non-domestic managers – in particular US-based ones, according to a report by Mercer Human Resource Consulting. Of the top 20 managers of European pension funds, 15 listed the US as one of their home countries.
Over the last five years, European countries, particularly those in the Nordic region, have increased their use of non-domestic managers. France, Germany and Ireland are also cited in the report as having seen significant growth in the number of non-domestic managers employed.
Mercer’s report, entitled ‘European Pension Fund Managers’ Guide 2002’, reveals the market share of non-domestic managers across Europe to be 8% compared to 2% five years ago.
Another trend noted in the report: the growth of specialist management. The survey of 180 fund managers from 18 European countries showed an increase of 64% in specialist mandates from five years ago – now totalling 47% of the 10,675 mandates covered in the guide.
The majority of these mandates are still in specialist equity, although there has been a 50% rise in specialist bond mandates over the past year, says Mercer. Equity mandates (including those non-specialist) increased by only 17% in the past year.
Says Julia Hobart, head of manager advisory at Mercer: “The sustained fall in equity markets has boosted demand for bond mandates as well as property and hedge funds. While hedge funds have high recognition value with pension funds, the reality is that only very small amounts have been invested at this point.“ Investment in hedge funds by pension funds is reported to be growing, particularly in Switzerland.