J.P. Morgan Predicts Top Investment Trends for 2012

The year 2011 was packed with market surprises from natural disasters to ratings downgrades to cultural revolutions.

As a new year begins, it’s only natural that those working in the institutional space have many questions about what 2012 will bring. J.P. Morgan Asset Management shared with clients their top predictions for investors in 2012. These predictions include:

•  Fiscal austerity will continue in 2012 and beyond, limiting growth in DM economies. As of mid-November 2011, consensus forecasts saw U.S. GDP growth in 2012 at just above 2%, although the outlook was a little better in December because of congressional action. J.P. Morgan’s Investment Bank expects global GDP growth of only 2% in 2012, which is a full percentage point below the 1992-2011 annualized average.

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•  Government yields will likely be lower. The broad trend for government yields in 2012 is lower, with the ECB catching up to its G-5 peers, and a bias for more quantitative easing from the Bank of England and the Bank of Japan. J.P. Morgan predicts the U.S. 10-year yield will hold below 3% in 2012.

•  EM growth should return. Although global growth will face headwinds from fiscally tightening developed markets, a partial offset will come from emerging markets, where policymakers will be easing monetary and sometimes fiscal policy to support growth. The differential between EM and DM growth, which narrowed to 3% in the second half of 2011, should return to a more typical 4.5 or 5% in the year ahead.

•  Within EM, the BRIC countries are worth watching. Although Brazil, Russia, India and China (BRIC) have underperformed overall for the past two years, China, Brazil and perhaps India could begin reversing that trend in 2012. China and Brazil are now leading the EM easing cycle, and growth should begin by spring.

•  Healthcare and technology will be a source of growth. Although J.P. Morgan predicts EM performance will be positive in 2012, they also think investors can “source growth” for portfolios in developed markets through innovation, with particular focus on technology and healthcare.

•  Interest in alternatives will increase. Because market volatility is likely to remain high this year, J.P. Morgan expects to see greater interest in alternatives, as investors become more willing to trade liquidity for better Sharpe ratios.

•  Pensions’ funding status will remain bleak. The outlook for pensions’ funding status in the U.S. and U.K. is not much brighter this year than it was in 2011. J.P. Morgan recommends investors consider strategies to try to reduce the volatility of the funded status; use market volatility to their benefit by locking in any funding improvement; and diversify growth assets to manage portfolio risk.

 

Mercer Changes Investment Organization

Mercer has aligned its investment organization to meet changing client needs and to advise on challenging market conditions.

The changes integrate global investment consulting and investment management at Mercer, provide the opportunity for tailored regional solutions, and strengthen Mercer’s manager research and wealth management capabilities globally, noted Phil de Cristo, president and group executive of investments.    

“Mercer continues to serve its traditional investment consulting client base. But directionally, many of our clients are asking Mercer to move beyond investment consulting and to assume a greater role in helping them manage their investment programs,” said de Cristo. “In an outsourced governance model where Mercer implements investment advice, Mercer almost becomes an extension of company staff. Some clients may not want to staff internally to oversee their alternative investments or other complex investment vehicles, or to monitor fast-moving markets. In other cases, involving DB pension plans, our clients have transitioned to a de-risking model where the speed of decision making enabled by outsourcing of implementation is critically important for clients.”  

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Under Mercer’s new organizational structure, four regional managers for investments, the head of manager research and wealth management, and the global chief investment officer (CIO) will report to de Cristo.  

Andrew Kirton will continue in his role as global CIO with an increased emphasis on strengthening Mercer’s portfolio management and strategic research capabilities.  

Jeff Schutes was named global head of manager research and wealth management. Cara Williams, will continue to lead wealth management, reporting to Schutes.   

Rich Nuzum was appointed head of Investments for the US. Tom Murphy will become head of fiduciary management for the U.S., reporting to Nuzum.  

Tom Geraghty was named head of Investments for EMEA (Europe, Middle East and Africa).  Michael Dempsey will become head of fiduciary management for EMEA, reporting to Geraghty.  

Stephen Roberts was named head of investments for Asia-Pacific. Simon Eagleton was appointed Australia/New Zealand market leader for investments.    

Ted Singeris was appointed the head of investments for Canada and Latin America. Yvan Bretan will become head of fiduciary management for Canada and Latin America, reporting to Singeris.

 

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