ALTERNATIVES BOUTIQUE

HOW WE CAN HELP YOU

Mercer’s alternative boutique is responsible for research and advice in all aspects of alternative investment, including:

• Strategic advice on building portfolios in areas such as hedge funds, private equity, infrastructure and active currency
• Research on investment trends and opportunities in multiple alternative asset classes
• Due diligence on managers and strategies
• Advice on portfolio structuring and development of portfolio pacing plans
• Performance reporting
• Assistance with fee and mandate negotiation
• Ongoing monitoring of investment managers and portfolios

Mercer pursues a two-pronged approach to working with clients in regards to their alternative asset allocation – we use both manager research and investment consulting experience to arrive at optimal solutions for clients.

• 14 average years of financial services industry experience
• Actively looking to increase the number of researchers
• 208 searches conducted in 2012, placing $8.1 billion globally
• More than 6,400 alternative strategies and 110 alternative product categories on Mercer’s Global Investment Manager Database (Mercer GIMD^TM).
• Covering a wide spectrum of alternative investment strategies, in conjunction with the real estate, bond and equity boutiques

For the more complex and challenging demands, the direct involvement of boutique professionals is possible.

To illustrate, recent examples include:

DYNAMIC APPROACH TO ASSET ALLOCATION

For a long time, and especially after the recent financial crisis, investors have wanted to take a more dynamic approach to asset allocation. Mercer has developed a number of solutions for clients in this regard, one of which is appointing global tactical asset allocation managers (GTAA). These are fund managers who actively manage exposures to different liquid asset classes. Fund managers offering products in this space come from both the long-only world, as well as from the hedge fund industry – where strategies are more likely to be called “global macro” or “CTAs” (commodity trading advisors).

One of the issues clients face is products tend to be leveraged and have high return targets and also high volatility. While this is efficient in that clients only need to allocate a small amount of capital to get the exposure they need, it does mean that risk budget can be dominated by GTAA, especially if only one manager is appointed. Mercer covers over 400 strategies, from which we have identified about 50 that achieve our highest ratings, and we are therefore happy to recommend. This means we can blend different products together for clients, resulting in a solution where the return series is more stable but still value adding. As an example, we helped a client in Europe achieve a diversified allocation to GTAA. This involved finding products covering a variety of styles and approaches. What was achieved was a portfolio of three managers, giving exposure to both fundamental and systematic/technical styles of investing, implemented partly through a quantitative approach and partly with a more discretionary style.

NORTH AMERICAN PENSION AND TRUST FUND

Two related groups retained Mercer to help them hire infrastructure managers. After discussing the goals of each organization, we suggested that the two groups jointly build a portfolio. This allowed both organizations to improve diversification of the infrastructure portfolio by investing in a broader range of sub-strategies, while also taking advantage of lower fees available to large investors. The result was a more refined portfolio at a lower cost for both organizations.