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Mercer predicts biggest manager search rise in Europe

GLOBAL – Canada and continental Europe are the areas that will see the most investment manager search activity in the period ahead, according to Mercer Investment Consulting.

Mercer IC conducted 90 US equity investment manager searches last year, accounting for $6bn of assets placed, making it Mercer IC’s most popular product category, according to its newly released Manager Search Trends Report 2004.

The report details search activity globally and by region, with a breakdown for the US, Canada, the UK, Europe ex-UK, Asia, Australia and New Zealand.

During the year Mercer IC’s investment teams advised on 764 manager searches globally, accounting for $84bn of assets placed, up 27% on 2003 and an all-time Mercer IC high.

The report, which analyses Mercer IC’s institutional clients’ investment manager hiring patterns and trends, ranked global equity second, down from first place in 2003, with 85 searches and $9bn of assets placed.

Currency overlay attracted the greatest rise in activity, the report says, with $10bn worth of assets placed from 28 searches, up from eight in 2003.

Looking ahead, it foresees a significant surge in search activity for international mandates by Canadian pension funds if the minority government that included a proposal to eliminate the foreign property rule, effectively lifting restrictions on foreign investments by local pension plans, in February’s finance bill lasts long enough to see the budget passed into law.

But continental Europe is the area where Mercer IC expects to see the greatest increase in search activity because of a move towards full funding of pension liabilities and, in common with the rest of the world, a general trend to a more global diversification to investment portfolios.

The report suggests that hedge funds are the product area that will experience the most growth over the period ahead, with Mercer IC seeing increased interest in funds of funds and directly invested hedge funds, and a strong preference by the institutional market for institutional-friendly hedge funds that apply the same standards of transparency, liquidity and client reporting required from conventional institutional managers.

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