Research shows growing interest in emerging markets, alternative asset classes

The rise in manager search activity in 2010 reflects growing investor appetite for emerging markets and alternative asset classes, according to a report from consulting firm Mercer.

Institutional investors want to increase their exposure to both equity and debt in emerging markets, and interest in alternative asset classes continues to grow as investors seek to diversify their portfolios to take advantage of a broader range of risk, the report said.

The “2010 Global manager search trends” report looks at global hiring patterns and search trends among institutional investment manager.

Last year, Mercer advised on 940 searches, up from 826 searches in 2009, confirming the rebound from 2008 (676 searches) when investors were more focused on strategic decisions following the financial crisis. The 2010 searches represented $95.6bn in assets placed by 361 institutional investors.

International equity was the most popular search category with 177 searches, though more assets were placed in global fixed income vehicles worth $13.5bn compared to $11.2bn for equity.

Searches rose across a range of alternative asset classes. Interest in real estate recovered reflecting the relative cheapness of this asset class after the property crash and there was more interest in commodities, infrastructure and multi-strategy hedge funds.

There was a substantial rise in emerging market searches for both equity and debt, as investors sought to take advantage of strong economic growth in Asian and other developing economies, the report said. Emerging market equity searches rose from 21 in 2009 to 50 in 2010 and emerging market debt searches rose from 4 to 45 for the same period.
 
Andy Barber, global director of manager research at Mercer, said interest in non-traditional asset classes continues to grow as investors look to further diversify their portfolios and take advantage of wider 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.”

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