Institutional investors attracted to emerging markets and alternatives

Institutional investors are increasingly interested in emerging markets and alternative assets to enhance diversification in their portfolios, according to Mercer’s Global Manager Search Trends 2011 report.

The report revealed that globally manager search activity increased in 2010, with search activity in Australia almost doubling, from 120 in 2009 to 216 in 2010. The report noted that in Australia there was a sharp rise in assets placed, from US$7.7 billion to US$14.9 billion.

Manager search activity also revealed an increased interest in real estate, emerging market equities and niche areas, such as commodities. Investors also sought diversification through international and domestic equity.

“We saw a lot of manager movement in Australian equities last year and search activity focused on smaller fund asset managers with highly rated teams,” said Mercer head of manager research for Asia Pacific, Marianne Feeley. “Our clients have also been looking for small cap managers, as small cap outperformed large cap in 2010. Another possible driver behind the increase in Australian equity searches is the tendency of some managers, particularly boutiques and small cap, to close to new investments.”