Mercer to offer diversified growth fund

EUROPE - Mercer is to launch its diversified alpha fund (DAF), its first fund under the new brand. The group was known as Mercer Global Investments until earlier this week.

Senior portfolio manager at Mercer Rob Marsden said the absolute return fund of hedge funds launch has five strategies with a low correlation to global equities, alongside the development of a liability-driven investment (LDI) product.

"I believe the advantage with the DAF, compared to perhaps other funds of hedge funds, is its transparency," he said. "We want to make it as transparent as possible, and in line with our other product range."

Despite Mercer's seemingly late arrival at the party, head of UK business development Dan Melley said he believed this is not necessary a hindrance to its offering and interest from clients.

There could be an advantage to joining the absolute returns alpha space late as Mercer has had time to observe the other players and learn from the market experience, he claimed, adding Mercer is not totally new to the game having first unveiled its multi-manager position a decade ago.

"We started this business in Australia 10 years ago and we are now one of the largest multi-managers in that country. We also launched the business in the US about four years ago and in Europe and Canada last year."

Melley said he expected the European multi-manager business to achieve assets of $1bn (€720m) in Europe by year-end and at least $3bn in five years. He based his estimate on the growth Mercer has seen elsewhere in its business.

Marsden said the multi-manager proposition was being offered as part of its implemented consulting offering to give trustees time to focus on regulatory or asset allocation issues.

Melley pointed to several academic findings that showed asset allocation was responsible for 60-90% of outperformance. But he noted pension fund trustees tend to focus 90% of their time on monitoring managers rather than on what really makes the difference.

He suggested lay trustees might tend to focus only on manager monitoring as that is perhaps "more fun" than considering the strategic risk they are taking with the assets.