• Value of assets placed through Mercer's investment consulting business manager search activity totalled US$76 billion in 2005, with the average placement US$101.6 million.
  
  
• International equities remain popular, with assets placed rising to nearly US$16 billion in 2005.
  
  
• More than one in six searches globally is in relation to alternative mandates.
  
  
• Search trends show an increasing use of consultants by Continental European investors.

Contents of the report include:   2005 Mercer's investment consulting search summary statistics Global search activity trends Region specific profiles:   - US - Canada - UK - Europe (ex-UK) - Australia - Asia - New Zealand

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Overview

During 2005, Mercer's investment consulting business advised on 748 manager searches globally, accounting for US$76 billion in assets placed. There was particular growth in search activity in the Europe region (excluding the UK) with 152 searches conducted.

International equity overtook US equity as the most popular single product category among Mercer’s investment consulting clients for 2005, with 164 searches accounting for nearly US$16 billion, or 21% of total assets placed. US equity was the second most popular category, with 75 searches and more than US$7.4 billion worth of assets placed. 

Europe

In Europe, excluding the UK, assets placed rose slightly, from US$22.7 billion in 2004 to US$25.2 billion in 2005. Multi-asset and global equity saw the most search activity in the region.

'The number of searches in Continental Europe increased dramatically in 2005 as both our business and the use of consultants continue to grow across the region', said Andy Barber, European Head of Research. Ireland saw the most search activity within the region, driven by changes in asset allocation and by the trend away from single-manager balanced structures towards structures seeking global equity exposure. 'We expect specialist search activity to increase across Europe this year', added Mr Barber.

Nearly 230 searches were conducted within the UK with total assets placed at US$29.9 billion. Global equity represented 42 of the searches and nearly US$6.2 billion in placed assets, an increase from 2004.

Mr Barber commented: 'While global equity continues to see the most search activity within the UK, the pick-up in private equity searches is striking. This suggests our UK clients are continuing to take a long-term view when deciding on strategic asset allocation'. 

North America

US search activity decreased overall in 2005, mainly due to reduced defined contribution (DC) search activity, which fell in 2005. 'We believe the reason for this downturn is the delayed impact of the mutual fund late-trading and market-timing scandals of 2003, which prompted an unusual level of search activity in 2004', said John Frede, Americas Head of Research.

'We expect DC search activity to remain on pace with 2005 levels as search activity reverts to more normal trends. There should be few, if any, searches due to replacement of managers caught up in the mutual fund trading scandals, as reforms have been implemented that address regulatory issues', Mr Frede added.

Similarly, DB/other searches saw a rise in assets placed despite a slowdown in search activity. In the US, Mercer's investment consulting business conducted 117 DB/other searches in 2005.

Despite the downturn in DB searches, assets placed rose slightly, from nearly US$8.8 billion in 2004 to nearly US$9.2 billion in 2005. International mandates continued to be the most frequently sought asset class in both DC and DB plans.

"'Plan sponsors’ implementation of portfolio structural changes was the main driver of DB search activity in 2005”, said Mr Frede. 'These ongoing structural changes include increasing exposure to international investments, diversification into alternative investments, and rebalancing between growth and value, and small cap and large cap equities".

In Canada, search activity in 2005 was broadly in line with that of prior years, but the type of searches varied considerably from 2004. For instance, the elimination of foreign content restrictions early in 2005 resulted in an increase in the activity of non-domestic asset class searches, particularly with respect to US equity searches.

Mercer's investment consulting business conducted 101 searches in Canada representing a total of US$4.3 billion in assets. 

Asia and Australia

Search activity in Asia remained essentially unchanged from the previous year, with 44 searches in 2005. Assets placed as a result of these searches totalled US$3.4 billion, a considerable decline from the US$6 billion placed in 43 searches in 2004. There was increased interest in global equity mandates, which represented 36.4% of searches, up from 9.3% in 2004. Global equity accounted for nearly one-third of total placements for Asia, rising from just 1.0% the previous year.

'Search activity in Asia can be subject to considerable variability from one year to the next given the diversity of clients and volume of assets being placed from year to year. In 2006 we expect to see sustained interest in search activity, as Asian markets continue to open up to offshore investments and institutions', said Marianne Feeley, Asia Head of Research.

In Australia, investors seeking diversification and higher returns were the primary drivers behind most search activity in 2005. Mercer's investment consulting business conducted 97 searches, with assets valued at nearly US$3.9 billion. Property was the most popular mandate in Australia, rising from 10.9% to 23.7% of activity in 2005.

However, Ms. Feeley said: 'Overall, however, 2005 was below average in terms of search activity. In general, clients are satisfied with their current investment manager mix, and strong performance of equity and fixed income markets have given them little reason to reconsider that structure'.

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