Mercer stays on the sidelines

Amid the recent global sharemarkets turmoil, Mercer is taking the view that political uncertainty makes it too early to adopt an aggressive risk position.

"In terms of asset allocation, Mercer is maintaining a neutral stance between growth and defensive assets for its balanced 'growth' investment portfolio," the big institutional investor said in a statement to its clients.

BlackRock agreed that a lack of political will was contributing to the uncertain economic environment.

"The genesis of this selloff was the debt ceiling wrangling and brinksmanship. While no one expected a default, our politicians only kicked the can down the road again. Markets hate uncertainty, and Washington gave us more," said BlackRock chief equity strategist for fundamental equities Bob Doll.

The Mercer statement said that under normal circumstances, now would be a good time to increase exposures to shares since they "can be purchased at bargain prices while markets overreact to short-term data".

Mercer also said that it was moving to a 40 per cent hedge ratio on the Australian dollar (up from the previous 35 per cent) following the large fall on 9 August, to lock in some gains from the almost 10 per cent drop.

Clients that were currently overweight to shares might consider switching from developed market to emerging market shares, the statement said.