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Pension Funds Bargain Hunting for Crisis-Hit Assets
April 28, 2010

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London. European pension funds hired more fund managers in 2009 than in the year before to take advantage of bargains in crisis-hit asset classes, a study by consultants Mercer says.

In Britain, manager searches recovered to pre-crisis levels, hitting 245, from 189 in 2008.

Pension schemes around the world are moving toward a broader investment strategy, which involves allocations to assets such as property and hedge funds, aside from traditional areas such as equities and bonds.

The crisis accelerated this trend, allowing investors the opportunity to buy new assets at lower costs.

The asset class that benefitted most was global fixed income, where manager searches rocketed to 45 from two in 2008.

“For both corporate bonds and real estate, an element of pent-up demand was realized in 2009 as many investors had been waiting for more realistic prices before committing new money,” said Andy Barber, global head of manager research at Mercer.

Mercer said pension funds in Britain would invest more in the future in higher-yielding products as the continued search for returns prompted them to move away from mainstream markets.

Real estate manager searches grew four-fold to 28 and global equity to 57, from 48 in 2008.

Assets invested in global equity nearly doubled to $13.9 billion, while the mandate size awarded in 2009 in Britain was just under $42 billion, up from $26.1 billion the previous year. “We expect a growing interest in liability-driven investment as defined-benefit pension clients seek to manage their assets with closer reference to their liabilities,” Barber said.

Mercer said that mandate searches in continental Europe increased in 2009 to 126 from 93, although the assets invested fell to $10 billion from $13.4 billion.

“Although there are regional variations globally, we do sense a greater investor appetite for taking advantage of dislocation and low valuations than in previous market downturns,” Barber said.

 

Reuters