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Emerging markets and alternatives lead upward trend in investment manager searches

Manager search activity increased in 2010 with emerging markets and alternative asset classes receiving most interest, research by Mercer reveals.

Its 2010 Global Manager Search Trends report showed Mercer advised on 940 searches across the world last year, up 14% from 826 in 2009.

This increase is a continuation of the strong rebound from 2008 (676 searches), when investors were busy focusing on strategic decisions following the financial crisis, the consultant said.

The 2010 searches represent $95.6bn (£58.8bn) in assets placed by 361 institutional investors. Global/international equity remained the most popular search category (177 searches in 2010, down from 191 in 2009), though more assets were placed in fixed income ($13.5bn compared to $11.2bn in global/international equity).

In 2010, searches ran higher across a range of alternative asset classes compared with 2009, the data shows.

Interest in property has rebounded significantly with real estate totalling 67 searches in 2009 and 72 in 2010. Mercer said this reflects, in part, the relative cheapness of the asset class following a significant correction during the crash.

Growing interest in commodities (from 7 to 20 searches), infrastructure (from 14 to 17 searches) and multi-strategy hedge funds (from 24 to 31) was also evident.

Emerging market searches, both in equity and debt, saw a substantial increase, reflecting a desire on the part of investors to capture the strong economic growth in some Asian and other developing economies, Mercer added.

Emerging market equity searches rose from 21 in 2009 to 50 in 2010 and emerging market debt searches increased from 4 to 45.

Mercer global director of manager research Andy Barber said: "Interest in non-traditional asset classes continues to grow as investors look to increase diversification and take advantage of perceived attractive beta and alpha generation opportunities. The trend away from traditional investment began some time ago and while events such as the global financial crisis led to a slowing of the trend, it is one we expect to continue.

"That said, traditional equity and bond mandates are likely to remain the dominant areas of search activity for the foreseeable future."

Mercer said the UK saw a surge in search activity in 2009, followed by a focus on maintaining the new mandates in 2010.

The consultant said this led to a significant reduction in searches and assets placed.

Manager searches were down from 245 in 2009 to 196 in 2010, and assets placed dropped from $41.9bn to $23.9bn.

The strongest UK trend of 2010 was the growing interest in emerging market equity and debt with total searches rising from one equity search in 2009 to 36 (23 debt and 13 equity).

The weight towards debt may reflect growing concern at the high valuation of some emerging equity markets, the report suggests. The move away from domestic equities continued with only four searches in 2010 compared to eight in 2009 and 17 in 2008. Searches for global and UK fixed income also dropped considerably, from 45 to 8 and 33 to 10 respectively.

[Source: ProfessionalPensions.com