Almost 50% of new assets coming from a diverse set of non-defined benefit pension asset owners including insurers and endowments among others1
Key reasons for delegation cited by investors include a need for greater operational support, enhanced governance and risk management, and ability to capture investment opportunities rapidly
More institutional investors are looking to access outsourced chief investment officer (OCIO) investment solutions as they continue to grapple with market volatility and trying to achieve investment goals in a prolonged low real interest environment. Mercer, a global leader in redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being, today announced its global assets under management (AUM) reached $390 billion USD as of March 31, 20212
Originally developed to support the asset management needs of defined benefit pension funds, Mercer’s Investment Solutions and OCIO services have gained traction among other asset owners including endowments, foundations, insurers, wealth managers, not-for-profit healthcare organizations and defined contribution asset pools. Mercer has diversified its client base, with 2020 proving a notable shift, where almost 50% of growth from Q1 2020 through Q1 2021 came from non-defined benefit pension assets. From Jan 2016 to Apr 2021, defined contribution and other types of non-pension assets increased 245%, as other kinds of asset owners began to seek out sophisticated, responsive and cost-efficient investment strategies.
Between December 31, 2019, and December 31, 2020, Mercer added more than 100 new clients.
“Portfolio management oversight, complexity and cost continue to challenge asset owners, who also seek to capture market opportunities and strategically position their portfolios for longer-term prospects in private markets. We are also seeing that ESG and sustainability are driving many institutional investors to adopt new governance models,” says Mick Dempsey, Global Head of Investment Solutions and OCIO Services at Mercer.
He continued, “The combination of these factors, which impacts different investors in their own specific ways, is creating a rapidly growing interest in the OCIO market. We are delighted to help our clients address all these issues, with the most recent Ai CIO3 survey recognizing us as global market leader for full discretionary OCIO assets under management.”
“We are seeing growth in interest in gaining assistance with the implementation of investment programs across many client types and among large, sophisticated asset owners” said Rich Nuzum, President, Investments & Retirement at Mercer. “Governance has always been a focus for investors and investment committees. In response to last year’s market volatility, there is a growing emphasis on increasing agility and the ability to dynamically assess opportunities with an eye toward capturing returns and diversification opportunities more opportunistically. There is a strategic change in our industry underway, driven by reviews of how existing governance arrangements performed during the pandemic. Similar to the period immediately following the 2008-2009 financial crisis, more investors believe they need to strengthen their investment governance and implementation capabilities as they allocate capital for the long term.”
Continued litigation coupled with recent legislation expanding the set of available solutions within the Defined Contribution marketplace has contributed to the growth of the US DC OCIO business. Plan sponsors are looking for stronger governance, efficient execution and professional management of investments to better assist plan participants in meeting their retirement objectives.
Liana Magner, Mercer’s US Defined Contribution Leader said “ We have seen a continued trend of outsourcing the investment management of DC plans from corporate plan sponsors across the size spectrum from mid-market to mega sized plans, in an effort to minimize risk and improve investment outcomes, We believe the discussions around PEPs and full fiduciary delegation will continue this trend in the future.”
Learn more about Mercer’s Investments & Retirement services and our investment solutions.
Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s approximately 25,000 employees are based in 43 countries and the firm operates in 130 countries. Mercer is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 76,000 colleagues and annual revenue of $17 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer.
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1 Source: Mercer, 31 March 2021
2 The assets under management data (the AUM Data) reported here include aggregated assets for which Mercer Investments LLC (Mercer Investments) and their global affiliates provide discretionary investment management services as of the dates indicated. The AUM Data reported here may differ from regulatory assets under management reported in the Form ADV for Mercer Investments. For regulatory assets under management, please see the Form ADV for Mercer Investments which is available upon request by contacting Compliance Department, Mercer Investments 99 High Street, Boston, MA 02110.
3 Source: Mercer ranks #1 in OCIO according to Chief Investment Officer” magazine’s 2021 Outsourced CIO Buyer’s Guide Survey, worldwide discretionary OCIO assets under management as of December 31, 2020 as reported by each firm to ai-CIO (http://www.ai-cio.com/2021-Outsourced-Chief-Investment-Officer-Survey/).
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