Contents of the report include:     2006 Mercer's investment consulting search summary statistics Global fee activity trends Region specific profiles:   - US - Canada - UK - Europe (ex-UK) - Australia - Asia - New Zealand

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Overview

During 2006, Mercer's investment consulting business advised on 741 manager searches globally, accounting for US$92.3 billion in assets placed. There was particular growth in search activity in the Asian region with 83 searches conducted.

International equity (including all global, EAFE and other global ex my home country categories) remained the most popular product category among Mercer's investment consulting clients for 2006, with 143 searches accounting for nearly US$29 billion, or just over 31% of total assets placed. US equity was the second most popular category, with 76 searches and more than US$4 billion worth of assets placed.

"The total number of searches conducted has remained broadly stable over recent years. What has changed has been a slow but steady increase in search activity in non-traditional asset classes in all regions", said Andy Barber, Global and European head of research.

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Europe

Nearly 230 searches were conducted within the UK with total assets placed rising to US$36.9 billion. UK fixed income represented 50 of the searches and US$9.5 billion in placed assets, an increase from 2005.

In Europe, excluding the UK assets placed decreased from US$25.2 billion to US$20.8 billion in 2006. Again global equity and multi-asset equity saw the most search activity in the region.

"Of note outside of the UK, search activity fell to more "normal" levels following a surge in search numbers in 2005. Across Europe as a whole there was increased search activity in domestic bonds (Eurozone, outside the UK) and in an array of non-traditional asset classes", added Mr Barber.

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North America

US search activity decreased overall in 2006, mainly due to a decline in the number of defined contribution (DC) search activity.

"As the US and international equity markets continued to post positive absolute terms, there was less urgency to replace underperforming managers", said Jeff Gabrione, Americas head of research for Mercer's investment consulting business.

The number of defined benefit (DB)/other searches was only marginally less than in 2005, from 117 to 110. The value of assets placed in DB searches, however, continues to exceed the assets placed in DC searches.

"Also, uncertainty prior to enactment of the Pension Protection Act made it sensible to wait until Washington took definite action. Now that this matter is settled, we expect to see an increase in DC search activity," explains Jeff.

Canada experienced the same search activity in 2006 as in 2005, but overall aggregate assets placed were higher in 2006 than over the three preceding years. Search activity has been relatively consistent for the last four years. As predicted, following the removal of the foreign investment limits in 2005, Canadian equity search mandates have declined in favour of foreign equity mandates.

Mercer's investment consulting business conducted 101 searches in Canada representing a total of US$6.1 billion in assets.

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Asia and Australia

Search activity in Asia has almost doubled, with 83 searches in 2006. Assets placed have reached an all time high at just over US$11 billion. Searches were pretty equally split between the following mandates; Global equity, Global fixed income, Japan equity and other Asia Pacific equity.

Search activity in Australia in 2006 shows a modest increase over previous years in terms of number of searches. However, search activity by several large client means that the amount of assets placed was considerably higher than in previous years.

In New Zealand search activity increased slightly to 13 searches accounting for US$96 million.

"Due to the diversity of clients, search activity was fairly amorphous across the Asia Pacific region. However, interest in global asset classes, namely equity, fixed income and property, was a common thread," said Marianne Feeley , Asia head of research for Mercer's investment consulting business." In 2007 we expect to see more clients interested in non-traditional asset classes as well as in non-traditional constructions of traditional assets, such as long/short equity."

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Mercer is a leading global provider of investment consulting services, and offers customized guidance at every stage of the investment decision, risk management and investment monitoring process. We have been dedicated to meeting the needs of clients for more than 30 years, and we work with the fiduciaries of pension funds, foundations, endowments and other investors in some 35 countries. We assist with every aspect of institutional investing (and retail portfolios in some geographies), from strategy, structure and implementation to ongoing portfolio management. We create value through our commitment to thought leadership; world-class, independent research; and top-notch consultants with local expertise.