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“This is the fifth consecutive 'Highly Recommended' rating for Mercer, reaffirming Lonsec’s conviction in the quality and experience of our portfolio construction process and team. It’s a testament to the quality of our underlying investment structures and our strong competitive advantages in people, process and product design. It also recognises the value of the greater diversification we’ve built into our investment solutions over the past 12-18 months,” said Stephen Roberts, Mercer’s Investment Management business leader for Asia Pacific.
The ‘Highly Recommended’ rating is only granted where “Lonsec has high conviction that the fund or product can achieve its objectives and, if applicable, outperform peers over an appropriate investment timeframe.”
In its November 2011 Fund Review of the Mercer Multi-Manager Funds, Lonsec cited four key reasons for Mercer’s ‘Highly Recommended’ status, noting that: “The rating is a reflection of Lonsec’s conviction in the quality and experience of the Mercer Australian Investment Team, their in-depth research (supported by Mercer’s Research Boutiques business), innovative approach to portfolio construction and the continued evolution of the Funds.”
The Fund Review highlighted the strengths of Mercer’s Strategic Asset Allocation (SAA) and Dynamic Asset Allocation (DAA) processes, stating that:
- “Mercer has proven to be innovative in its approach to SAA, designing portfolios that are not only well diversified, but that are less reliant on traditional beta sources than most managers assessed by Lonsec. Mercer holds one of the largest alternatives and real assets exposures in the Lonsec peer group. Furthermore, Mercer has the lowest allocation to the domestic equity market within the Lonsec peer group. Lonsec considers it prudent to diversify away from domestic equity market risk and into alternatives and real assets (where a manager has skill to do so), believing it can lead to improved risk adjusted performance over a full market cycle.”
- “Lonsec considers Mercer’s approach to DAA to be transparent and clearly articulated. Lonsec notes that Mercer has been successful over the 3 years to July 2011 in DAA, with attribution results showing asset allocation having added considerable value over that time.”
Another strength is that “Mercer has a preference for high conviction strategies and aims to avoid over-engineering portfolios by focusing only on those managers where they hold the highest conviction. Mercer has shown a preparedness to back new strategies early and identify the ‘next generation’ managers.”
Lonsec also noted that “Mercer splits out the growth and defensive characteristics of each asset class, recognising that some assets display both growth and defensive characteristics (i.e. credit). Lonsec regards this as a logical approach believing it aids in portfolio construction by providing greater clarity as to the overall risks in the Funds.”
“Being rated ‘Highly Recommended’ five times over a period that has included the global financial crisis, rebounding markets and ongoing volatility is a testament to the quality of Mercer’s offering to our clients and highlights just how consistent we are in delivery. We are the only multi-manager fund provider to be rated consistently at the highest level by Lonsec over this period,” Mr Roberts said.
Mercer is a leading global provider of consulting, outsourcing and investment services. Mercer works with clients to solve their most complex benefit and human capital issues, designing and helping manage health, retirement and other benefits. It is a leader in benefit outsourcing. Mercer’s investment services include investment consulting and multi-manager investment management. Mercer’s 20,000 employees are based in more than 40 countries. The company is a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York and Chicago stock exchanges.