GLOBAL - Mercer has urged institutional investors to consider developing markets as an alternative to developed countries that suffer from high debt burdens and a dearth of bank lending.

The consultancy said there was still a strong bias toward these countries, rather than developing nations, which were enjoying stronger growth and population increases.

Divyesh Hindocha, who is global director of consulting at the group's investment consulting business, said investors were more inclined to invest in large-cap stocks, which would increase their risk exposure and could compromise returns.

He said: "The growth trajectory of developing countries was only briefly interrupted by the financial crisis, whereas many developed economies now face public, corporate and private debt issues that will take many years to work through."

Hindocha said these factors, combined with a growing amount of regulation and the risk of policy missteps, ran the risk of slowing economic growth in these countries.

"We appear to be in the opening act of a fundamental rebalancing of the global economy," he said.

"While this may not be guaranteed, it is a brave investor who would take such a significant bet against the emerging world and other growth engines."