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Latest Research and Publications


Activist Investing: Good governance, good investment?

In this brief article, we go back to basics by defining activist investing and explaining why this type of investment exists. We also examine what seems to be the changing perception of activism and how investors can consider this when it comes to their portfolios. 

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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. 

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Preparing for Fed Lift-Off

The Fed seems likely to take its first tentative step towards “normalisation,” although the recent turmoil in markets might keep them on hold until 2016. There are a number of investment implications and actions that we think are worth consideration..


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 organisation.

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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.

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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.

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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.

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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. 

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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. 

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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