How asset owners can transform governance into a potential strategic advantage 

Allocating more to private markets might be making the headlines – particularly considering the recent volatility across public markets. But in a rapidly evolving investment landscape, asset owners also acknowledge they are under mounting pressure to ensure their governance frameworks remain fit for purpose to improve their odds of success at meeting (or exceeding) their investment goals and objectives.

In Mercer’s Large Asset Owner Barometer 2025 , surveying asset owners with a combined AUM of over $2 trillion about their sentiment towards the key risks to their portfolios and subsequent asset allocation decisions, confidence in portfolio resilience remains relatively strong, despite rising geopolitical tensions, inflationary pressures and an evolving regulatory landscape to contend with.  

Despite the perceived resiliency, the survey revealed an underlying concern that complexity within organizational structures may be limiting agility and hindering long-term performance, particularly given the pace of innovation in areas such as AI and private markets.

Over half of large asset owners surveyed said that overly complex governance structures are preventing timely and effective decision-making. They admit they need to commit meaningful resources or operational expenditures over the coming years to strengthen their risk and data systems, which we believe will lead to improved efficiency and, ultimately, better outcomes. 

Many large asset owners are backing their governance evolution with meaningful investments in operational infrastructure. More than a quarter say they plan to commit significant resources over the coming year to improve risk systems, data integrity, and compliance capabilities.

Notably, over half plan to spend on risk systems and data hygiene—indicating a recognition that better data can lead to more informed decisions. AI capabilities, while widely seen as transformative, remain underdeveloped in many organizations. Fewer than one in three respondents say they plan to invest meaningfully in AI over the next year, suggesting a lag between awareness and action.

Governance and talent are tightly interlinked. The complexity of modern portfolios—particularly in private markets—demands specialized knowledge that is increasingly hard to recruit. Nearly half of large asset owners point to private markets expertise as a significant talent gap, with direct or co-investment knowledge close behind.

These capability constraints are influencing every aspect of investment strategy, from asset allocation to manager selection. For many large asset owners, bridging the gap will mean doubling down on partnerships, platforms, and technologies that extend the reach of lean internal teams.

In response to these challenges, many large asset owners are turning to outsourcing as a way to reduce internal burdens while retaining strategic control. Particularly in resource-intensive asset classes like private equity, private credit, and hedge funds, outsourcing is now the preferred approach.

Only a small fraction of large asset owners report managing their entire portfolios in-house. For most, the governance challenge has shifted from making every decision internally to overseeing external managers with the right expertise. This hybrid model demands robust oversight but can enable greater efficiency and scale.

Cost, complexity, and talent constraints are other key drivers. 64% of large asset owners cite the resource intensity of managing assets in-house as a reason for outsourcing, while 62% highlight the difficulty of accessing the necessary skillsets. The message is clear: strategic outsourcing is no longer just an operational choice—it’s a governance imperative.

As the investment landscape grows more sophisticated, governance must do the same. That doesn’t necessarily mean adding layers of process. It means building models that are responsive, informed, and aligned with strategic goals.

We are seeing a clear awareness from asset owners that governance processes must evolve to match the rate of change within the investment industry, with increasing investment in risk and data management systems and strategic outsourcing of the most complex asset classes helping ensure asset owners can not only ensure effective governance but can transform governance into a potential strategic advantage.

In today's rapidly evolving investment landscape, the need for adaptive governance has never been more critical. As asset owners increasingly recognize the complexities of managing diverse portfolios, partnering with a trusted outsourcing provider can help to can transform your outcomes. Our Outsourced Chief Investment Officer (OCIO) solutions are designed to build agile, resilient portfolios that not only seek to alleviate the burdens of in-house management but also look to enhance governance through expert oversight and strategic alignment. As a true partner to your portfolio, Mercer is committed to addressing today’s investment challenges and preparing you for the future, enabling you to navigate the complexities of today’s market with confidence, and transforming governance into a potential strategic advantage.