Study: Pensions See Biggest Jumps in Fixed Income, Bonds, Property

A new study by Mercer shows manager searches have recovered to pre-crisis levels, with Australia, UK and Continental Europe seeing the most significant increases.

(April 29, 2010) — According to a study by Mercer, institutional investors regained confidence last year. European pension funds hired more fund managers in 2009 compared to previous years to take advantage of bargains in assets hit during the financial crisis.

In the UK, manager searches reached 245 worth $41.9 billion, from 189 in 2008 and 242 in 2007, recovering to pre-crisis levels, the consultancy’s 2009 Global Manager Search Trends report showed. Almost 830 investment manager searches were conducted worldwide by more than 400 companies. Value of assets placed through Mercer’s manager search activity totaled $97.2 billion in 2009, up from $93 billion.

“Although there are regional variations, we do sense a greater investor appetite for taking advantage of dislocation and low valuations than in previous market down-turns,” said Andy Barber, global head of manager research at Mercer, in a statement. “Looking forward, we expect a growing interest in liability driven investment (LDI) as defined benefit pension clients seek to manage their assets with closer reference to their liabilities.”

The biggest jumps in 2009 were seen in Australia, where the number of searches doubled compared with the previous year. In both the UK and Europe, search activity also rose considerably. However, in North America the increases were relatively small in comparison. In Asia, searches decreased by a third.

European pension funds are increasingly moving toward a broader investment strategy that encompasses investments in alternative assets, such as property and hedge funds, in addition to more traditional assets like equity and bonds. The study showed that global fixed income increased the most, with manager searches skyrocketing to 45 from two in 2008, with real estate becoming an attractive option, as searches for property increased fourfold.

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