Mercer’s 2010 Global Manager Search Trends report showed defined benefit (DB) searches ran at slightly lower levels compared with the previous year – down from 126 in 2009 to 118. Defined contribution (DC) searches were also down from the previous year (173 in 2009 to 162) but continued to outpace DB searches.
However, the most significant U.S. trend Mercer found has been the change in focus from fixed income to alternative asset classes and equities, driven by the desire to further diversify portfolios. The total number of global/international equity searches (54) in both DB and DC plans was up 23% from 2009 searches of 44, and up 35% from the 2008 level of 39.
Terry Dennison, U.S. Director of Consulting in Mercer’s Investment Consulting business, said: “In the DB space the main driver of search activity was sponsors’ focus on increasing exposure to international equity – both developed and emerging market. Sponsors also sought to review and realign their domestic equity exposures.On the DC side, sponsors showed a desire to both increase asset diversification for their members and provide some inflation protection. Hence, the most popular searches were global/international equity, emerging market equity, TIPS, REITs and real return-type options.”
In Canada, search activity ran at higher levels than last year (147, up from 137), however asset placements have dropped from $6.7 billion to $4.3 billion. DC accounted for most of the increase in searches, particularly within the traditional balanced, equity and fixed income classes. Global/international equity remains the most popular category (47 searches), followed by Canadian equities (32) and balanced/multi-asset (27).
Searches in Asia increased from 40 in 2009 to 70 in 2010, however assets placed dropped significantly from $19.2 to $4.8. The most popular search category remained global/international equity (11 searches), but the bulk of assets were placed in real estate (US$1.2 billion). Some Asian investors are increasingly worried about the impact of future increases in inflation, which has resulted in searches for global inflation-linked bonds (3 searches).
Search activity in Australia almost doubled from 120 in 2009 to 216 in 2010 and there was a sharp rise in assets placed - from $7.7billion to $14.9 billion. Notable increases came through growing interest in real estate (up from 8 searches in 2009 to 31) and emerging market equities (up from 2 to 7) as well as in niche areas such as commodities (2 searches in 2010). Global/international and domestic equity searches also saw a significant increase as investors sought to diversify their portfolios. Global/international equity searches increased from 23 in 2009 to 39 in 2010 and domestic equity from 24 to 44.
In New Zealand, manager search activity dropped from 32 in 2009 to 25 in 2010, though assets placed increased from $483 million to $842 million. Searches in the traditional sectors dominated with New Zealand equities (11) and global fixed income (8) the most popular asset classes.Interest in emerging market categories was the main driver of search activity in the UK and Europe (see "Emerging Markets, Alternatives Drive Manager Search Activity").