Mercer posted very strong growth across the company’s delegated investment solutions offering in 2012. Mercer’s global assets under management reached $69.8 billion as of December 31, 2012, an increase of 31.7% from the $53 billion a year ago. In Europe, Mercer’s delegated assets grew by $7 billion in 2012 and now stand at $17.5 billion as at 31 December.
In Europe, growth experienced in the delegated investment solutions segment came from the UK, Ireland and the Nordics. Drivers behind this growth continues to be the challenges faced by closed and underfunded defined benefit pension plans as they try to grow assets to close deficits as well as hedge their interest rate and inflation exposures.
“Equity market volatility continues, interest rates are low, there is uncertainty in the Euro Zone and returns from alternatives are disparate. Against this background, institutions are looking for services that enable them to quickly adjust their portfolio in response to market changes while ensuring that investment governance remains strong,” said Mick Dempsey, Mercer’s head of fiduciary management in Europe.
In September 2012, Mercer issued data highlighting movements in FTSE350 Pension Deficits since 2002. Despite almost £175 billion in company contributions, pension schemes retain substantial deficits. In 2002, the value of assets and liabilities in the FTSE350 stood at £282 billion and £357 billion respectively. By 2012, assets held in the FTSE350 defined benefit schemes had increased to £501 billion while liabilities had increased to £574 billion.
According to Dan Melley, Mercer’s UK head of fiduciary management, “Our data underlines the volatile environment - deficits have oscillated from lows of £43 billion in 2007 to highs of £103 billion in 2009. This suggests that in some cases the risk/return position adopted by many companies in conjunction with their schemes’ trustees has not paid off. Company balance sheets, and potentially scheme members, are vulnerable to external events. As a result, many companies are now much more active in managing this risk in light of changes in market conditions. One of the options that they consider is Mercer’s fiduciary management services.”
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