March 20, 2012
--- Private equity, hedge funds and real estate will drive a combined 20% of all manager search activity in the U.S. ---
It will also drive one-fourth of all new or expanded investment mandates this year, according to the 2012 Consultant Search Forecast conducted by eVestment Alliance and Casey, Quirk & Associates.
According to the forecast, four themes will power investor search activity in 2012: generating steady income in a low interest rate environment, globalization, alternatives becoming core positions in portfolios and the shift to liability-driven investing by corporate pension plans.
Search Activity
Consultants expect to see three noticeable shifts in search activity during 2012:
- Alternatives: Consultants expect the plurality of search activity in 2012 to focus on hedge funds, private equity and real estate, with interest reflecting both new allocations and turnover. The ongoing shift toward outcome-oriented portfolios—which require investments that avoid market correlation—will favor all flavors of alternatives.
- Long-duration fixed income: Rising interest in this asset class reflects the cyclical realities of the yield curve, but also the secular shift of corporate defined benefit pension plans trying to immunize liabilities. An influx of top-up contributions during 2011 also has likely boosted demand for long-dated bonds.
- Domestic long-only portfolios: As a group, U.S. equity and domestic core/core-plus fixed income managers will continue to face shrinking flows from asset owners and intermediaries in 2012. While continued portfolio globalization is a key reason for this, the current low-interest-rate environment has pushed asset owners to consider income flows from emerging and high-yield markets within fixed income. Consultants expect strong interest in global equity to continue.