Conducting Due Diligence During a Pandemic

Mercer-Backstop alliance allows asset allocators to kick the tires on investments remotely.


For asset managers, conducting the proper due diligence concerning a potential investment often requires a lot of traveling and many face-to-face meetings—something that just hasn’t been possible during the COVID-19 pandemic.

But a timely, new strategic alliance formed by consulting firm Mercer and Backstop Solutions Group, a provider of customer relationship management (CRM) software suites for investment managers,  may help institutional investors conduct much of the necessary due diligence remotely.

The alliance allows for Mercer’s institutional investment data to be available through Backstop’s platform, which can be accessed remotely. Backstop clients who subscribe to Mercer’s cloud-based investment manager research and analytics platform MercerInsight will have access to institutional investment data, research, and ratings on more than 7,000 managers and 35,000 strategies through Backstop’s productivity platform. This will allow institutional asset owners, consultants, and advisers to see Mercer’s views on managers remotely.

“In this pandemic environment, especially with the market shifting around, more asset owners are looking to shift around their portfolios, and they want to make sure they’re doing their operational due diligence,” Clint Coghill, CEO of Backstop Solutions Group, said in an interview with CIO. “In an environment where it’s harder to have face-to-face meetings, being able to rely on Mercer’s research and operational due diligence offers a great deal of value for them.”

Although the strategic alliance seems tailor-made for life in the time of COVID, it was initiated by Mercer and Backstop before the pandemic hit.

“While this was not planned for the pandemic, I think we’re very fortunate it’s coming at a time when we can really help our clients and allow them to access all the information they need when they’re not able to travel as much and meet with managers and conduct due diligence,” Barbara Marder, Mercer’s global product solutions lead, told CIO. “The timing actually is great for our clients.”

Marder said a lot of asset owners would be traveling around to do all the due diligence themselves and that they’ve seen a substantial increase in interest in the digital self service. “In this particular environment, it makes their lives much easier because they can get the quality information they need without having to leave their desks,” Marder said.

For example, Coghill says that if a pension plan is interested in adding to its private equity or growth exposure, but it hasn’t done its operational due diligence and hasn’t gone on site and hasn’t spent time with the team, the process could come to a halt because its team members can’t do that in the current pandemic environment.

“However, if they know Mercer has gone on site in the past six months, they can use their operational due diligence,” Coghill said. “It gives them that extra degree of confidence in the decision they are making.

The alliance is poised to benefit from a sharp rise in remote working that has been years in the making. Contrary to popular belief, the COVID-19 pandemic is not responsible for the work-at-home revolution that has become as ubiquitous as the virus—it merely sped things up.

Research from Gartner-owned GetApp found that remote work has nearly quadrupled in the past decade as a survey showed that, prior to COVID-19 lockdown orders, 36% of respondents worked remotely at least once a week, and 58% worked remotely at least once a month. This is compared with the 9.5% of the public who worked at home in 2010, according to the US Census Bureau.

And, according to the U.S. Bureau of Labor Statistics, the industries most conducive to remote work include information, financial, and business services.

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