Investment consultant Mercer will acquire Vanguard’s Institutional Advisory Services group, which provides OCIO services to institutional clients, both firms confirmed in a The acquisition is expected to close in the first quarter of 2024.
“Vanguard’s differentiated investment philosophy, strength in the not-for-profit sector, and client-centric approach complements our global capabilities across OCIO and managing alternative asset classes,” said Marc Cordover, U.S. investments and retirement leader at Mercer.
Vanugard’s 120-employee team will transfer to Mercer upon closing of the deal. Vanguards OCIO business provides investment management services for non-profits and institutional investors in the United States.
Shekhar Mukherjee, a director at Clearwater Analytics, notes that one reason for the deal may have been noted that among the reasons behind the deal maybe be that OCIO clients have been “getting more sophisticated over the years” when it comes to the investment mix on offer. While asset managers still offer their own funds for the investment strategies—often as the majority of investments—there is more demand for third-party options and varied investment strategies such as alternatives.
“Clients want exposure beyond just funds and ETFs, as they’ve gotten less comfortable with that model over the years,” he says.
Vanguard Institutional Advisory Services reported having 1,162 full-discretion clients and $52.3 billion in full discretionary assets, according to data in the CIO OCIO survey, published in June.
Most of Vanguards OCIO clients will also be transferred to Mercer, which operates a larger OCIO business, according to the CIO survey in which the firm reported 1,962 full discretion clients and $275.1 billion in full discretion assets.
While Mercer’s OCIO business is larger, the combination could add significantly to the firm’s OCIO assets from endowments and foundations and from healthcare pools, which are categories where Vanguard has larger portfolios. If all the business moves over at the levels reported in CIO’s OCIO survey, Vanguard’s $23.5 billion endowment and foundation portfolio and $14.2 billion of healthcare pool assets would join Mercer’s $19.4 billion of endowment and foundation assets and $2.5 billion of healthcare pool assets.
“We are confident our OCIO clients will continue to enjoy high-quality investment solutions, ably stewarded by the mission-driven professionals who will continue to serve them,” said John James, managing director of Vanguard’s institutional investor group, in a statement. “With Mercer’s expertise, capabilities, and commitment to driving optimal client outcomes, we believe it is well positioned to help our OCIO clients navigate the evolving OCIO landscape.”
The move comes shortly after Marsh McLennan announced that Mercer will get a new CEO and president in April 2024. In an October announcement, Pat Tomlinson was named president, with plans to take the role of CEO from Martine Ferland when she retires at the end of March.
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Tags: John James, Marc Cordover, Mercer, OCIO, Vanguard, Vanguard Institutional Advisory Services