Instos “suppress” their home country biases

Institutional investors continued to suppress home country biases and globalise equity portfolios during 2009, a year in which risk appetite returned as equity markets rallied and short-dated credit strategies thrived, according to manager search data from Mercer Investment Consulting.

Mercer clients were most interested in global equity markets, commissioning the consultant to perform 191 searches, in which $25.8 billion was invested. This represented a 25 per cent increase in the number of searches completed in the previous year.

However searches for fixed-income managers increased at the most dramatic rate, shooting up from 25 in 2008 to 92 in 2009 as investors were attracted to short-dated credit and convertible bond strategies.

While the number of real estate searches rose to 67, close to pre-credit crunch levels, the number of searches for domestic equity managers declined in most regions.

Overall, Mercer undertook 826 manager searches in 2009, a rise of 22 per cent from the previous year, as risk appetite returned as markets recovered from the financial crisis and compelling opportunities arose, said Andy Barber, global head of manager research.

“Although there are regional variations, we do sense a greater investor appetite for taking advantage of dislocation and low valuations than in previous market downturns,” Barber said in an announcement.

“For both corporate bonds and real estate, an element of pent-up demand was realised in 2009 as many investors had been waiting for more realistic prices before committing new money.”

The number of searches instituted by Australian investors almost doubled from 61 to 120, although the volume of assets placed dropped from $15.2 billion to $7.7 billion, reflecting a trend for smaller placements, said Marianne Feeley, head of manager research in Asia-Pacific.

But in Asia, search activity fell by a third as investors were more concerned with reviewing their manager line-ups rather than taking on new exposures, Feeley said.

In the UK and Europe, the number of searches rose to 245 from 189, with assets placed rising to $41.9 billion, while in North America there was no substantial change.