Research & Financial Markets



/content/dam/mercer/1000x282/conceptual/Gradient Conceptual/img-FL000046d-gradient-1000x282.jpg

Mercer's Investments publications provide a range of useful and insightful investment information across the investment continuum

MARKET UPDATES

 

Mercer Monthly Market Summary

The Market Summary provides a quick overview of global financial markets and includes a concise tabulation of key index returns and other financial data.
 

Find out more

 


Market Environment Report

The market summary highlights the capital market environment during the quarter and our views of various asset classes.
 

Download Report

 


US Perspective on Market Assumptions and Dynamic Asset Allocation Outlook

Perspectives on the market outlook and valuations over a medium-term horizon are significant drivers for investors. View Mercer's summary of return assumptions and relative valuations on a number of asset classes, pairs and styles.
 

Find out more

 


Periodic Table of Annual Index Returns

Mercer’s quarterly periodic table of asset class returns reflect annual returns from 2004 through the first quarter 2014 across different asset classes.
 

Find out more

Mercer's Quarterly Investment Review


Webcast Replay

/content/dam/mercer/1000x282/conceptual/Gradient Conceptual/img-FL000046d-gradient-1000x282.jpg

A collection of Mercer's latest research and intellectual capital across the investment continuum

LATEST RESEARCH & PUBLICATIONS

 

Effectively Aligning Definitions of Success with Proper Benchmark Selection

In this short series of two papers on benchmarking, we explore the challenges of defining, using, and understanding appropriate benchmarks, starting with a discussion on the importance of accurately defining what success means for your organization.

 

Find out more

 


The Role of Liquid Alternatives in Wealth Management

It’s no secret that investors are looking for uncorrelated return sources for their portfolios. Low interest rates and the experience of the global financial crisis are leading many to include “liquid alternatives” in their toolbox. At Mercer, we define liquid alternatives broadly as strategies that follow alternative strategies, such as those typically used by hedge funds, and that are available as commingled/pooled funds that trade at least weekly.

 

Find out more

 


Fossil Fuel Investments under the Spotlight

Institutional investors are coming under increasing pressure to disclose their holdings in, and divest their portfolios from, investments deemed to contribute significantly to global warming (by contributing to carbon emissions) – most notably those in the fossil fuel and mining industries. 

 

Find out more

 


Betting on Rising Rates

In May 2012 we published a white paper challenging DB pension plan sponsors on how to manage interest rate exposure in a low rates environment. Since then rates have effectively moved sideways through a rapid rise followed by an equally rapid fall. Given that rates are still at the same level as they were 3½ years ago our paper is still relevant today.

 

Find out more

 


Understanding Private Equity – A Primer

In this paper we will review some basic asset class characteristics, the return expectations, return drivers, evidence of outperformance, implementation considerations, and discuss the optimal use of private equity in a portfolio. Because private equity investing involves some concepts not found in other asset classes, we have provided a glossary of terms at the end of this paper.

 

Find out more

 


Preparing for Fed Lift-Off

Since the financial crisis, central banks around the world have supplied extraordinary monetary stimulus to the global economy through record low interest rates and quantitative easing (“QE”). The most influential central bank, the US Federal Reserve (“the Fed”), has maintained its target rate at close to zero since December 2008 and increased the size of its balance sheet by around $3.5trn. The Fed seems likely to take its first tentative step towards “normalisation” at some point in the next few months, although the recent turmoil in markets might keep them on hold until 2016.

 

Find out more

 


Mercer View on Recent Stock Market Turmoil

Institutional investors are coming under increasing pressure to disclose their holdings in, and divest their portfolios from, investments deemed to contribute significantly to global warming (by contributing to carbon emissions) – most notably those in the fossil fuel and mining industries. 

 

Find out more

 


What’s behind the Chinese Currency devaluation?

On 11 August, the Peoples’ Bank of China (PBC) announced changes to the daily fixing arrangements for the yuan. In practical terms, the new policy represents further liberalization of the FX regime, which is in line with the Chinese government’s desire for internationalization of their currency.

 

Find out more

 


Assessing the Active Share Concept

This paper illustrates how active share provides a simple way to identify managers who are truly active in their stock selection and have an opportunity to outperform.

 

Find out more

 


Why we believe The Economist is wrong about hedge funds

The Economist published an article in its August 1 edition, titled “Fatal Distraction,” arguing that pension schemes are making a mistake in employing hedge funds to manage assets on their behalf: “For the pension schemes that are the hedgies’ latest target, handing over cash makes no sense.” Many of the arguments used in the article are open to debate and we would urge institutional investors to challenge their conclusions.

 

Find out more

 


Chinese Equity Sell-off

Chinese equities have suffered very sharp declines in recent weeks. The rapid collapse was preceded by an equally impressive rally which saw prices doubling since 21st November 2014, when the People’s Bank of China (PBoC) reduced interest rates in an attempt to revive its flagging economy.

 

Find out more

 


Bond Investing in a Liquidity-Constrained Environment

The changing nature of today’s bond markets, characterised by low yields, reduced market liquidity and the growth of retail ETFs, calls for an evolution in how institutional investors approach both their defensive and growth-oriented bond allocations.

 

Find out more

 


Investment Manager Fees - A Critical Look

This article suggests a number of ways in which the current and common structures for investment managers’ fees are imperfect, or worse. Are there other possible ways in which fees might be structured?

 

Find out more

 


GREXODUS - The Uncertainty Persists

Greece has requested a new bailout package from the eurozone, just hours before its bailout expires. Given the ongoing Greek debt crisis, Mercer experts put together a short paper discussing potential implications for investors and market impacts.

 

Find out more

 


China A-Shares: The Implications of Prospective Inclusion in Global Indices

China A-shares comprise stocks listed on the domestic Chinese stock exchanges, which to date have not been included in the major global equity indices of the large index providers. In their most recent reviews, neither MSCI nor FTSE decided to include China A-shares in their respective global indices, but expectation is building from a number of market participants that this is likely to change in the near term. In this paper we discuss the reasons for this and the implications for investors.

 

Find out more

 


Low Volatility Equities and High Valuations

In 2010 Mercer issued guidance recommending that clients have an explicit allocation to low volatility equities. Since then equity markets have risen significantly, and despite these strong market returns, low volatility equities have kept pace with the broader market.

 

Find out more

 


 

Company Stock in DC Plans Survey

Mercer Investment Consulting, Inc., compiled a 2015 survey of our defined contribution (DC) plan clients to determine how they are handling company stock funds within their plans in the post-Dudenhoeffer environment.

 

Find out more

 


Collateralized Loan Obligations

After a slow start following the US sub-prime mortgage meltdown in 2007/2008, collateralized loan obligation (CLOs) activities have been surging again lately. This paper reviews briefly the construction of CLOs, explores their current environment, examines current valuations, and outlines some factors that investors should consider before making an investment.

 

Find out more

 


 

Don't Be Passive About Passive Management

Passive management is seen as a straightforward and mechanistic way of accessing a market exposure with the main objective being to produce index-like returns cost effectively. However whilst inherently they are not complicated investments, there is still a large amount of expertise and resources that go into managing these strategies, which goes beyond headline fees and the simple tracking of an index.

 

Find out more

 


Global REITs

REITs offer investors complementary access to investment in unlisted real estate. While risks are inherent in global investing, we believe the benefits available through global REITs can be substantial. Mercer’s belief is that REITs are real estate investments — not simply concentrated equity investments.

 

Find out more

 


 

Risk Premia Investing – From the Traditional to Alternatives

In this paper we provide an overview of the risk premia concept and focus on a set of liquid “alternative” (or non-traditional) risk premia in particular.

 

Find out more

 


 

Best Ideas for the Hibernation Portfolio

As the wave of Liability Driven Investing (LDI) has continued to gather steam, the discussion has moved beyond what LDI is to how to implement efficient LDI portfolios and best manage pension risk, factoring the idiosyncratic characteristics of the liabilities and the yield-curve construction rules, as well as the time horizon of the plan sponsor.

In this paper, we set out our recommended construction of a hibernation portfolio and discuss potential variations depending on plan sponsor objectives .

 

Find out more

 


 

An Investment Framework for Sustainable Growth

In Mercer's Investment Framework for Sustainable Growth, we distinguish between the financial implications associated with ESG factors, and the growth opportunities in industries most directly affected by sustainability issues. Mitigating emerging risks requires flexibility, foresight, and fresh thinking about risk management and capitalize on new opportunities.

 

Find out more

 


 

The Pursuit of Sustainable Returns - Sustainability by Asset Class

Mercer's portfolio reference guide, 'The Pursuit of Sustainable Returns: Integrating Environmental, Social, and Corporate Governance Factors and Sustainability by Asset Class' outlines the drivers for addressing sustainable growth trends at a portfolio level for each major asset class.

 

Find out more

 


 

Multi-Asset Strategies – An Overview of the Choices

Multi-asset strategies have seen a surge in popularity over recent years. Liquidity, simplicity, and relatively low fees have made them attractive components of defined contribution pension schemes, as well as appealing to smaller institutional investors for whom governance issues are a key consideration.

 

Find out more

 


Smart beta: What is it? Why is it better than traditional beta?

Smart beta can be summarized as a systematic investment strategy, where the return pattern is driven by some factor or group of factors being accessed. We invite you to watch the Institutional Masterclass video series.

 

Find out more

 


Hedge Funds in the Current Environment

We believe that now is a good time to consider hedge fund investing. The strategic case remains valid and many current factors are positive for hedge funds. This article explores the case for hedge funds with a focus on the current environment and offers some thoughts on choosing the best hedge funds and how to build robust portfolios.

 

Find out more

 


Health System Mergers Require Rethink of DC Plans

This paper provides a brief overview of defined contribution (DC) plan considerations facing health care organizations that engage in M&A activity. We also include a high-level comparison of 401(k) and 403(b) plans, key issues with plan mergers, the potential loss of church plan status, the importance of DC retirement plan governance, and regulatory changes.

 

Find out more

 


A Trilogy on Return and Risk for Endowments & Foundations

Some aspects of risk can take a back seat when endowments and foundations (E&Fs) focus on comparing their performance to that of their peers. But E&Fs are exposed to many types of risk because of their high allocation to alternatives, their complex funding and spending structures, and diversity among their constituencies. We believe that we have an opportunity to redefine the concepts of return and risk in the E&F context.
 

Given the breadth of this subject, we will address the components in a white paper trilogy:

•   A New Approach to an Old Concept — Improving investment policy by refining risk management
•   Integrating Expectations — Human nature and the plight of the investment committee
•   Lessons in Diversification — The limits of diversification

 

Find out more

 


SEC's New Rules for Money Market Funds

On July 23, 2014, the SEC issued a set of reforms for Money Market Funds. The rules have been amended to address risks of a run on MMFs, and are to be implemented in the next two years. These changes are only applicable to money market mutual funds regulated by Rule 2a-7 under the Investment Company Act of 1940.

 

Find out more

 


Is Retail Property Dead in Europe − Or Just Some of It?

E-commerce is changing the retail landscape but it doesn’t change the rationale for retail property investment. However, given the rise of online sales and the potential impact on bricks-and-mortar shops, investors have to pay more attention to asset selection and monitor retail tenants as well as overall retail industry trends more closely.

 

Find out more

 


Building Equity Portfolios with Style

Much has been written recently about “smart beta,” “advanced beta,” “intelligent indexing,” and various other buzzwords — broad terms that are not always well-defined. Looking beneath these catchy titles, Mercer believes that it is important to focus on the underlying drivers of return and how this can help investors with constructing and monitoring their portfolios.

 

Find out more

 


Private Capital: Getting the Governance Fund Right

A commitment to a private capital fund is the beginning of a long-term relationship and requires strong conviction in the manager’s skills and considerable trust on behalf of investors. Detailed due diligence on the capability of the manager is critical. An evaluation of a fund should extend to an assessment of the fund’s commercial terms and the strength of the manager’s alignment of interests with investors.

 

Find out more

 


Building a Real Asset Portfolio

Given current valuation levels, traditional fixed income investments are less attractive to investors as income-generating assets, and uncertainty remains in equity markets strengthening the case for real assets in client portfolios.

 

Find out more

 


Multi-Asset Strategies – Redefining the Universe

Loved by many, reviled by others, multi-asset strategies are undeniably a key feature of the investment landscape. In the US they are typically known as balanced strategies; in Europe and other parts of the world investors have been enticed by a category of investments known as "diversified growth funds". Whatever the label, however, the variety of strategies is broadening across the globe.

 

Find out more

 


Should ICD-10 Impact Investment Strategy?

ICD-10 represents the tenth revision for the International Classification for Diseases for Healthcare providers. This research paper discusses the potential investment considerations which could flow from any cash flow disruptions due to ICD-10.

 

Find out more

 


Small, Smid, or Mid?

For many investors, their US equity lineup includes a dedicated small cap allocation as a complement to a more sizable US large cap allocation, with no specific allocation to mid cap or smid cap equities. This research paper discusses approaches of small and mid cap investing and potential benefits that may lead to a superior performance.

 

Find out more

 


Emerging Markets - Revisiting our Strategic Rationale for Investing

Emerging markets have been volatile and periodically suffered from significant capital outflows since May 2013 when the Fed Chairman suggested a potential tapering of the quantitative easing program. Since then, the MSCI emerging market index lost over 9% and currencies of Argentina, Brazil, Chile, India, Russia, Turkey and South Africa dropped between 8% and 35%. Given the recent market volatility we would like to share with you our latest thinking on emerging market investing.

 

Download PDF

 


Fixed Income - New Treasury Floating Rate Notes (FRNs)

In November, the U.S. Treasury announced that the first floater issuance in history will take place on January 29, 2014. The FRN is the first new product that the Treasury has brought to market in 17 years.

 

Download PDF

 


Outlook for Emerging Market Debt

We have most recently favored investments in local currency debt for a number of reasons but principally on the grounds of higher yield, improved issuer credit quality, and the potential for EM currencies to appreciate over time. The focus of this paper is to revisit our views on the outlook for local currency EMD.

 

Download PDF

 


Emerging Market - Review of Performance

The significant underperformance of emerging markets over 2013 to date is a surprise to investors and have underperformed around 19% year to date and investors are rightly wondering what has driven this divergence in returns and whether any action might be justified in response. The Paper attempt to address both of these questions.

 

Download PDF

 


Equity Risk Premium - A Review

This paper discusses the three broad methods of developing an estimate of the equity risk premium including the Historical, the Fundamental Forecast, and the Market Implied approach.

 

Download PDF

 


Successful Hedge Fund Implementation

This paper seeks to define the key elements of a successful hedge fund implementation, discusses risk premia approaches and concludes with practical applications.

 

Download PDF

 


Global High Yield Bonds Update

In January 2012, Mercer released a paper outlining our views on high-yield bonds. In that paper, we suggested that it was an opportune time for investors to make a strategic allocation to high-yield bonds. At the time, we believed that with wide spread levels, it was also an attractive point for tactical allocation. High-yield bonds offer attractive returns over time with less volatility than equities and it should offer more downside protection than the equity market typically provides. However, over longer periods we would expect equities to exhibit higher returns, as they are the riskier asset class, being lower in a company's capital structure; theoretically, this should mean that investors receive a higher reward for the extra risk they are taking.

 

Download PDF

 


Private Debt - Makes Its Way Into Institutional Portfolios

Mercer believes that institutional investors are changing their attitude towards the European private debt market - moving away from an opportunistic approach to longer-term, more strategic allocations. The future of private debt continues to look bright.

 

Download PDF

 


Risk Parity - Concept, Products and the Start of a Bond Bear Market

Risk parity started to emerge in the mid-2000s as a new approach to portfolio construction. Having identified weakness in mean variance modeling approaches, proponents argued that equal risk weighting return drivers should produce more efficient investment portfolios.

 

Download PDF

 


Emerging Market Domestic Demand - Beyond Platitudes in an Equity Allocation

What should investors consider to ensure that opportunities in emerging markets domestic demand growth are captured in their equity allocation? Take action.

 

Download PDF

 


The Final Frontier - Investing in Frontier Markets Equity

Over the last three decades, emerging markets have become an increasingly important component of the global economy and emerging market equities are now widely held as part of a broadly diversified equity portfolio. Now, many investors are asking whether frontier markets present investors today with a similar opportunity to make that available to emerging markets investors in the 1980s.

 

Download PDF

Additional research & publications


Defined Benefit 

Mercer provides premium-quality advice on investment strategy, risk management, governance and implementation, and global research on investment managers and asset classes.

Defined Contribution 

Mercer provides end-to-end consulting and helps clients develop an investment strategy for their defined contribution plan that drives workforce and financial performance.

Non-for-profit 

Mercer is a specialist in the unique challenges facing endowments, foundations and health care organizations. 
 

Wealth Management 

Mercer provides wealth management firms and other intermediaries with professional advisory services, analytical technology, and implemented solutions, all driven by our institutional-caliber manager research and intellectual capital.

Managing Risk 

Mercer helps clients develop a holistic risk management strategy that includes diversifying investment opportunities and considering risk-transfer options that address their specific situation, and helps them attain their objectives efficiently.

/content/dam/mercer/1000x282/conceptual/Gradient Conceptual/img-FL000046d-gradient-1000x282.jpg

Accessing investment opportunities for you

2015 Themes & Outlook


Mercer’s white paper “2015 Themes & Opportunities” outlines a number of ideas that we believe merit consideration in 2015. The evolving economic environment and the exceptional performance of many markets over the last six years underscores the need to take a fresh look at portfolios in 2015. Investor-specific beliefs, objectives, and constraints will ultimately determine the appropriate actions.

“The Global Economy: 2015 Outlook and Beyond” highlights additional research which reflects Mercer’s view on the major economic variables and markets in 2015 and beyond.

 

Find out more

 


Mercer's Investment Beliefs


Every investor has unique objectives. We invite you to review Mercer's beliefs around key investment themes that both underpin our approach and drive investment success.

 

Find out more

 


Market uncertainty creates opportunities


Deb Clarke, Global Head of Investment Research at Mercer, explains how recent volatility in global financial markets could be buying opportunities for investors.

 

Watch the CNBC video

 


How to Be More Opportunistic


Over the last decade, institutional investors across much of the developed world have gradually reduced their exposure to equity markets. This has led to increase in bond allocations alongside growing allocations to alternative assets. While much of this activity has been motivated by a desire to reduce both liability driven-relative risk and exposure to equity market volatility, many investors have introduced allocations to alternative assets on an "opportunistic" basis; that is, where there exists an opportunity to invest in assets offering attractive (or very attractive) prospective risk-adjusted returns.

 

Download PDF

Research Perspectives


Download our latest research perspectives and read about other investment opportunities.
 

 

Download PDF

 

 

 

Market Updates

Mercer's Investments publications provide a range of useful and insightful investment information across the investment continuum

MARKET UPDATES

 

Mercer Monthly Market Summary

The Market Summary provides a quick overview of global financial markets and includes a concise tabulation of key index returns and other financial data.
 

Find out more

 


Market Environment Report

The market summary highlights the capital market environment during the quarter and our views of various asset classes.
 

Download Report

 


US Perspective on Market Assumptions and Dynamic Asset Allocation Outlook

Perspectives on the market outlook and valuations over a medium-term horizon are significant drivers for investors. View Mercer's summary of return assumptions and relative valuations on a number of asset classes, pairs and styles.
 

Find out more

 


Periodic Table of Annual Index Returns

Mercer’s quarterly periodic table of asset class returns reflect annual returns from 2004 through the first quarter 2014 across different asset classes.
 

Find out more

Mercer's Quarterly Investment Review


Webcast Replay

Strategic Research

A collection of Mercer's latest research and intellectual capital across the investment continuum

LATEST RESEARCH & PUBLICATIONS

 

Effectively Aligning Definitions of Success with Proper Benchmark Selection

In this short series of two papers on benchmarking, we explore the challenges of defining, using, and understanding appropriate benchmarks, starting with a discussion on the importance of accurately defining what success means for your organization.

 

Find out more

 


The Role of Liquid Alternatives in Wealth Management

It’s no secret that investors are looking for uncorrelated return sources for their portfolios. Low interest rates and the experience of the global financial crisis are leading many to include “liquid alternatives” in their toolbox. At Mercer, we define liquid alternatives broadly as strategies that follow alternative strategies, such as those typically used by hedge funds, and that are available as commingled/pooled funds that trade at least weekly.

 

Find out more

 


Fossil Fuel Investments under the Spotlight

Institutional investors are coming under increasing pressure to disclose their holdings in, and divest their portfolios from, investments deemed to contribute significantly to global warming (by contributing to carbon emissions) – most notably those in the fossil fuel and mining industries. 

 

Find out more

 


Betting on Rising Rates

In May 2012 we published a white paper challenging DB pension plan sponsors on how to manage interest rate exposure in a low rates environment. Since then rates have effectively moved sideways through a rapid rise followed by an equally rapid fall. Given that rates are still at the same level as they were 3½ years ago our paper is still relevant today.

 

Find out more

 


Understanding Private Equity – A Primer

In this paper we will review some basic asset class characteristics, the return expectations, return drivers, evidence of outperformance, implementation considerations, and discuss the optimal use of private equity in a portfolio. Because private equity investing involves some concepts not found in other asset classes, we have provided a glossary of terms at the end of this paper.

 

Find out more

 


Preparing for Fed Lift-Off

Since the financial crisis, central banks around the world have supplied extraordinary monetary stimulus to the global economy through record low interest rates and quantitative easing (“QE”). The most influential central bank, the US Federal Reserve (“the Fed”), has maintained its target rate at close to zero since December 2008 and increased the size of its balance sheet by around $3.5trn. The Fed seems likely to take its first tentative step towards “normalisation” at some point in the next few months, although the recent turmoil in markets might keep them on hold until 2016.

 

Find out more

 


Mercer View on Recent Stock Market Turmoil

Institutional investors are coming under increasing pressure to disclose their holdings in, and divest their portfolios from, investments deemed to contribute significantly to global warming (by contributing to carbon emissions) – most notably those in the fossil fuel and mining industries. 

 

Find out more

 


What’s behind the Chinese Currency devaluation?

On 11 August, the Peoples’ Bank of China (PBC) announced changes to the daily fixing arrangements for the yuan. In practical terms, the new policy represents further liberalization of the FX regime, which is in line with the Chinese government’s desire for internationalization of their currency.

 

Find out more

 


Assessing the Active Share Concept

This paper illustrates how active share provides a simple way to identify managers who are truly active in their stock selection and have an opportunity to outperform.

 

Find out more

 


Why we believe The Economist is wrong about hedge funds

The Economist published an article in its August 1 edition, titled “Fatal Distraction,” arguing that pension schemes are making a mistake in employing hedge funds to manage assets on their behalf: “For the pension schemes that are the hedgies’ latest target, handing over cash makes no sense.” Many of the arguments used in the article are open to debate and we would urge institutional investors to challenge their conclusions.

 

Find out more

 


Chinese Equity Sell-off

Chinese equities have suffered very sharp declines in recent weeks. The rapid collapse was preceded by an equally impressive rally which saw prices doubling since 21st November 2014, when the People’s Bank of China (PBoC) reduced interest rates in an attempt to revive its flagging economy.

 

Find out more

 


Bond Investing in a Liquidity-Constrained Environment

The changing nature of today’s bond markets, characterised by low yields, reduced market liquidity and the growth of retail ETFs, calls for an evolution in how institutional investors approach both their defensive and growth-oriented bond allocations.

 

Find out more

 


Investment Manager Fees - A Critical Look

This article suggests a number of ways in which the current and common structures for investment managers’ fees are imperfect, or worse. Are there other possible ways in which fees might be structured?

 

Find out more

 


GREXODUS - The Uncertainty Persists

Greece has requested a new bailout package from the eurozone, just hours before its bailout expires. Given the ongoing Greek debt crisis, Mercer experts put together a short paper discussing potential implications for investors and market impacts.

 

Find out more

 


China A-Shares: The Implications of Prospective Inclusion in Global Indices

China A-shares comprise stocks listed on the domestic Chinese stock exchanges, which to date have not been included in the major global equity indices of the large index providers. In their most recent reviews, neither MSCI nor FTSE decided to include China A-shares in their respective global indices, but expectation is building from a number of market participants that this is likely to change in the near term. In this paper we discuss the reasons for this and the implications for investors.

 

Find out more

 


Low Volatility Equities and High Valuations

In 2010 Mercer issued guidance recommending that clients have an explicit allocation to low volatility equities. Since then equity markets have risen significantly, and despite these strong market returns, low volatility equities have kept pace with the broader market.

 

Find out more

 


 

Company Stock in DC Plans Survey

Mercer Investment Consulting, Inc., compiled a 2015 survey of our defined contribution (DC) plan clients to determine how they are handling company stock funds within their plans in the post-Dudenhoeffer environment.

 

Find out more

 


Collateralized Loan Obligations

After a slow start following the US sub-prime mortgage meltdown in 2007/2008, collateralized loan obligation (CLOs) activities have been surging again lately. This paper reviews briefly the construction of CLOs, explores their current environment, examines current valuations, and outlines some factors that investors should consider before making an investment.

 

Find out more

 


 

Don't Be Passive About Passive Management

Passive management is seen as a straightforward and mechanistic way of accessing a market exposure with the main objective being to produce index-like returns cost effectively. However whilst inherently they are not complicated investments, there is still a large amount of expertise and resources that go into managing these strategies, which goes beyond headline fees and the simple tracking of an index.

 

Find out more

 


Global REITs

REITs offer investors complementary access to investment in unlisted real estate. While risks are inherent in global investing, we believe the benefits available through global REITs can be substantial. Mercer’s belief is that REITs are real estate investments — not simply concentrated equity investments.

 

Find out more

 


 

Risk Premia Investing – From the Traditional to Alternatives

In this paper we provide an overview of the risk premia concept and focus on a set of liquid “alternative” (or non-traditional) risk premia in particular.

 

Find out more

 


 

Best Ideas for the Hibernation Portfolio

As the wave of Liability Driven Investing (LDI) has continued to gather steam, the discussion has moved beyond what LDI is to how to implement efficient LDI portfolios and best manage pension risk, factoring the idiosyncratic characteristics of the liabilities and the yield-curve construction rules, as well as the time horizon of the plan sponsor.

In this paper, we set out our recommended construction of a hibernation portfolio and discuss potential variations depending on plan sponsor objectives .

 

Find out more

 


 

An Investment Framework for Sustainable Growth

In Mercer's Investment Framework for Sustainable Growth, we distinguish between the financial implications associated with ESG factors, and the growth opportunities in industries most directly affected by sustainability issues. Mitigating emerging risks requires flexibility, foresight, and fresh thinking about risk management and capitalize on new opportunities.

 

Find out more

 


 

The Pursuit of Sustainable Returns - Sustainability by Asset Class

Mercer's portfolio reference guide, 'The Pursuit of Sustainable Returns: Integrating Environmental, Social, and Corporate Governance Factors and Sustainability by Asset Class' outlines the drivers for addressing sustainable growth trends at a portfolio level for each major asset class.

 

Find out more

 


 

Multi-Asset Strategies – An Overview of the Choices

Multi-asset strategies have seen a surge in popularity over recent years. Liquidity, simplicity, and relatively low fees have made them attractive components of defined contribution pension schemes, as well as appealing to smaller institutional investors for whom governance issues are a key consideration.

 

Find out more

 


Smart beta: What is it? Why is it better than traditional beta?

Smart beta can be summarized as a systematic investment strategy, where the return pattern is driven by some factor or group of factors being accessed. We invite you to watch the Institutional Masterclass video series.

 

Find out more

 


Hedge Funds in the Current Environment

We believe that now is a good time to consider hedge fund investing. The strategic case remains valid and many current factors are positive for hedge funds. This article explores the case for hedge funds with a focus on the current environment and offers some thoughts on choosing the best hedge funds and how to build robust portfolios.

 

Find out more

 


Health System Mergers Require Rethink of DC Plans

This paper provides a brief overview of defined contribution (DC) plan considerations facing health care organizations that engage in M&A activity. We also include a high-level comparison of 401(k) and 403(b) plans, key issues with plan mergers, the potential loss of church plan status, the importance of DC retirement plan governance, and regulatory changes.

 

Find out more

 


A Trilogy on Return and Risk for Endowments & Foundations

Some aspects of risk can take a back seat when endowments and foundations (E&Fs) focus on comparing their performance to that of their peers. But E&Fs are exposed to many types of risk because of their high allocation to alternatives, their complex funding and spending structures, and diversity among their constituencies. We believe that we have an opportunity to redefine the concepts of return and risk in the E&F context.
 

Given the breadth of this subject, we will address the components in a white paper trilogy:

•   A New Approach to an Old Concept — Improving investment policy by refining risk management
•   Integrating Expectations — Human nature and the plight of the investment committee
•   Lessons in Diversification — The limits of diversification

 

Find out more

 


SEC's New Rules for Money Market Funds

On July 23, 2014, the SEC issued a set of reforms for Money Market Funds. The rules have been amended to address risks of a run on MMFs, and are to be implemented in the next two years. These changes are only applicable to money market mutual funds regulated by Rule 2a-7 under the Investment Company Act of 1940.

 

Find out more

 


Is Retail Property Dead in Europe − Or Just Some of It?

E-commerce is changing the retail landscape but it doesn’t change the rationale for retail property investment. However, given the rise of online sales and the potential impact on bricks-and-mortar shops, investors have to pay more attention to asset selection and monitor retail tenants as well as overall retail industry trends more closely.

 

Find out more

 


Building Equity Portfolios with Style

Much has been written recently about “smart beta,” “advanced beta,” “intelligent indexing,” and various other buzzwords — broad terms that are not always well-defined. Looking beneath these catchy titles, Mercer believes that it is important to focus on the underlying drivers of return and how this can help investors with constructing and monitoring their portfolios.

 

Find out more

 


Private Capital: Getting the Governance Fund Right

A commitment to a private capital fund is the beginning of a long-term relationship and requires strong conviction in the manager’s skills and considerable trust on behalf of investors. Detailed due diligence on the capability of the manager is critical. An evaluation of a fund should extend to an assessment of the fund’s commercial terms and the strength of the manager’s alignment of interests with investors.

 

Find out more

 


Building a Real Asset Portfolio

Given current valuation levels, traditional fixed income investments are less attractive to investors as income-generating assets, and uncertainty remains in equity markets strengthening the case for real assets in client portfolios.

 

Find out more

 


Multi-Asset Strategies – Redefining the Universe

Loved by many, reviled by others, multi-asset strategies are undeniably a key feature of the investment landscape. In the US they are typically known as balanced strategies; in Europe and other parts of the world investors have been enticed by a category of investments known as "diversified growth funds". Whatever the label, however, the variety of strategies is broadening across the globe.

 

Find out more

 


Should ICD-10 Impact Investment Strategy?

ICD-10 represents the tenth revision for the International Classification for Diseases for Healthcare providers. This research paper discusses the potential investment considerations which could flow from any cash flow disruptions due to ICD-10.

 

Find out more

 


Small, Smid, or Mid?

For many investors, their US equity lineup includes a dedicated small cap allocation as a complement to a more sizable US large cap allocation, with no specific allocation to mid cap or smid cap equities. This research paper discusses approaches of small and mid cap investing and potential benefits that may lead to a superior performance.

 

Find out more

 


Emerging Markets - Revisiting our Strategic Rationale for Investing

Emerging markets have been volatile and periodically suffered from significant capital outflows since May 2013 when the Fed Chairman suggested a potential tapering of the quantitative easing program. Since then, the MSCI emerging market index lost over 9% and currencies of Argentina, Brazil, Chile, India, Russia, Turkey and South Africa dropped between 8% and 35%. Given the recent market volatility we would like to share with you our latest thinking on emerging market investing.

 

Download PDF

 


Fixed Income - New Treasury Floating Rate Notes (FRNs)

In November, the U.S. Treasury announced that the first floater issuance in history will take place on January 29, 2014. The FRN is the first new product that the Treasury has brought to market in 17 years.

 

Download PDF

 


Outlook for Emerging Market Debt

We have most recently favored investments in local currency debt for a number of reasons but principally on the grounds of higher yield, improved issuer credit quality, and the potential for EM currencies to appreciate over time. The focus of this paper is to revisit our views on the outlook for local currency EMD.

 

Download PDF

 


Emerging Market - Review of Performance

The significant underperformance of emerging markets over 2013 to date is a surprise to investors and have underperformed around 19% year to date and investors are rightly wondering what has driven this divergence in returns and whether any action might be justified in response. The Paper attempt to address both of these questions.

 

Download PDF

 


Equity Risk Premium - A Review

This paper discusses the three broad methods of developing an estimate of the equity risk premium including the Historical, the Fundamental Forecast, and the Market Implied approach.

 

Download PDF

 


Successful Hedge Fund Implementation

This paper seeks to define the key elements of a successful hedge fund implementation, discusses risk premia approaches and concludes with practical applications.

 

Download PDF

 


Global High Yield Bonds Update

In January 2012, Mercer released a paper outlining our views on high-yield bonds. In that paper, we suggested that it was an opportune time for investors to make a strategic allocation to high-yield bonds. At the time, we believed that with wide spread levels, it was also an attractive point for tactical allocation. High-yield bonds offer attractive returns over time with less volatility than equities and it should offer more downside protection than the equity market typically provides. However, over longer periods we would expect equities to exhibit higher returns, as they are the riskier asset class, being lower in a company's capital structure; theoretically, this should mean that investors receive a higher reward for the extra risk they are taking.

 

Download PDF

 


Private Debt - Makes Its Way Into Institutional Portfolios

Mercer believes that institutional investors are changing their attitude towards the European private debt market - moving away from an opportunistic approach to longer-term, more strategic allocations. The future of private debt continues to look bright.

 

Download PDF

 


Risk Parity - Concept, Products and the Start of a Bond Bear Market

Risk parity started to emerge in the mid-2000s as a new approach to portfolio construction. Having identified weakness in mean variance modeling approaches, proponents argued that equal risk weighting return drivers should produce more efficient investment portfolios.

 

Download PDF

 


Emerging Market Domestic Demand - Beyond Platitudes in an Equity Allocation

What should investors consider to ensure that opportunities in emerging markets domestic demand growth are captured in their equity allocation? Take action.

 

Download PDF

 


The Final Frontier - Investing in Frontier Markets Equity

Over the last three decades, emerging markets have become an increasingly important component of the global economy and emerging market equities are now widely held as part of a broadly diversified equity portfolio. Now, many investors are asking whether frontier markets present investors today with a similar opportunity to make that available to emerging markets investors in the 1980s.

 

Download PDF

Additional research & publications


Defined Benefit 

Mercer provides premium-quality advice on investment strategy, risk management, governance and implementation, and global research on investment managers and asset classes.

Defined Contribution 

Mercer provides end-to-end consulting and helps clients develop an investment strategy for their defined contribution plan that drives workforce and financial performance.

Non-for-profit 

Mercer is a specialist in the unique challenges facing endowments, foundations and health care organizations. 
 

Wealth Management 

Mercer provides wealth management firms and other intermediaries with professional advisory services, analytical technology, and implemented solutions, all driven by our institutional-caliber manager research and intellectual capital.

Managing Risk 

Mercer helps clients develop a holistic risk management strategy that includes diversifying investment opportunities and considering risk-transfer options that address their specific situation, and helps them attain their objectives efficiently.

Investment Opportunities

Accessing investment opportunities for you

2015 Themes & Outlook


Mercer’s white paper “2015 Themes & Opportunities” outlines a number of ideas that we believe merit consideration in 2015. The evolving economic environment and the exceptional performance of many markets over the last six years underscores the need to take a fresh look at portfolios in 2015. Investor-specific beliefs, objectives, and constraints will ultimately determine the appropriate actions.

“The Global Economy: 2015 Outlook and Beyond” highlights additional research which reflects Mercer’s view on the major economic variables and markets in 2015 and beyond.

 

Find out more

 


Mercer's Investment Beliefs


Every investor has unique objectives. We invite you to review Mercer's beliefs around key investment themes that both underpin our approach and drive investment success.

 

Find out more

 


Market uncertainty creates opportunities


Deb Clarke, Global Head of Investment Research at Mercer, explains how recent volatility in global financial markets could be buying opportunities for investors.

 

Watch the CNBC video

 


How to Be More Opportunistic


Over the last decade, institutional investors across much of the developed world have gradually reduced their exposure to equity markets. This has led to increase in bond allocations alongside growing allocations to alternative assets. While much of this activity has been motivated by a desire to reduce both liability driven-relative risk and exposure to equity market volatility, many investors have introduced allocations to alternative assets on an "opportunistic" basis; that is, where there exists an opportunity to invest in assets offering attractive (or very attractive) prospective risk-adjusted returns.

 

Download PDF

Research Perspectives


Download our latest research perspectives and read about other investment opportunities.
 

 

Download PDF

 

 

 

CONTACT OUR TEAM

Recent Activities

Mercer

Periodic Table of Annual Index Returns — Mercer

Mercer’s interactive annual table of asset class returns charts reflect the annual and quarterly returns from 2005 through 2014 across different asset classes.   Learn More

Mercer

Navigating the New Frenzy in Global Mergers and Acquisitions

Having the right technical HR technical knowledge and practical capabilities is key to capitalizing on the boom in today’s highly complex and nuanced cross-border deals.  Learn More

Mercer

Holidays Worldwide Vary Greatly by Country

Mercer’s Worldwide Benefit & Employment Guidelines provides an overview of mandatory and private benefit practices, statutory regulations, and employment conditions. Learn more about public holiday practices. 15 December 2014  Learn More