During 2008, Mercer advised on 676 manager searches across the world, representing $93 billion in assets placed, according to a news release. Globally, searches ran at lower levels than in previous years, although assets placed reached their highest levels yet.
In the U.S., search activity was up as plan sponsors reacted to the large losses in equity markets by reconsidering their policies and making some tactical decisions about rebalancing, as well as replacing managers who had performed exceptionally poorly, Mercer said. The most notable decreases in search activity were seen in the United Kingdom, Continental Europe, and Australia, where funds focused on strategy issues rather than manager changes and structures. In New Zealand the number of searches also dropped after a year of high levels brought on mainly by tax changes.
In the U.S., virtually every asset class experienced significant losses, yet search activity was fairly strong compared to 2007 (up to 123 from 110). Defined contribution (DC) searches (151) continued to outpace defined benefit (DB) searches (123), although the number of DB searches in 2008 declined from the previous year (170). The value of assets placed in DB searches continued to exceed the assets placed in DC searches.
With a total of 21 searches, global/international equity continued to be the most frequently sought asset class in both DC and DB plans in the U.S. Continued diversification, among equity styles and capitalizations, was also an apparent common denominator in both plan types, according to Mercer.
The number of Canadian equity searches increased in 2008 (32 to 38). However, they were overshadowed by the increase in amounts placed in non-domestic equity mandates, jumping from $1.8 billion to $2.7 billion in 2008. On the alternatives side, activity increased, with the most popular strategy being infrastructure, where a doubling of search activity was observed in 2008.
International Equity Tops Manager Search Categories
Globally, international equity (including all global, EAFE and other global ex domestic) remained the dominant investment manager search category, with 155 searches accounting for close to $23.5 billion in assets placed, up from $19.5 billion in 2007, according to Mercer’s 2008 Global Manager Search Trends report. There has been a decline in domestic equity searches in Continental Europe and the U.K., with combined figures dropping from $3.9 billion to $1.7 billion 2008, Mercer said.
Searches in real estate nearly halved from 62 in 2007 to 32 in 2008, however, the amount placed went up slightly to $1.9 billion. The survey shows an overall decline in non-traditional search activity, though most of this is accounted for by a large decline in the number of global TAA/global macro searches in the U.K. Of note is the global increase in activity in both private equity (up from five to 22 in 2008) and multi-strategy hedge funds (up from nine to 20 in 2008).
Copies of Mercer’s Manager Search Trends: 2008 Year-End Report and can be purchased for cost $2,000 at www.mercer.com/managersearchtrends.