Eager Davis: Manager hiring volume flat; alts and real estate gain
U.S. institutional investment manager hires were down a mere 0.5% in 2011, but total dollars placed increased by 13%, with alternatives and real estate seeing the largest jumps, according to a report Friday by manager consultant Eager, Davis & Holmes.
Overall hirings by U.S. institutional funds totaled 2,342 in 2011, compared to 2,354 in 2010.
Dollar amounts increased to $185.4 billion from $164.1 billion in 2010 due to more placements from the larger plans as well as an increase in global fixed-income placements, according to David Holmes, partner.
“Over the prior two years the largest plans, the largest institutional funds, with over $10 billion in assets, comprised 57% of the assets placed,” said Mr. Holmes in a telephone interview. “In 2011, they comprised 70% of the assets placed. So they accounted for a larger portion of the search activity.”
In addition, Mr. Holmes said, “Global fixed income (also) increased. Typically, (global fixed income is) associated with larger mandates than more specialized strategies.”
Global fixed-income placements totaled 48 worth $4 billion in 2011 compared to 20 worth $1.3 billion in 2010.
Alternative investments saw 1,007 placements worth $60.4 billion in 2011, up from 869 placements worth $37.7 billion in 2010, primarily by private equity and single-manager hedge funds.
Real estate had 309 placements worth $18.5 billion, compared to 237 placements worth $16.2 billion in 2010.
“Strategies that invest in real assets or opportunistic situations that offer less-correlated returns are particularly attractive right now,” Mr. Holmes said in a news release.
U.S. active equity placements totaled 288 worth $13.9 billion in 2011, vs. 413 placements worth $21.1 billion in 2010.
“The shift reflects institutional investors' concerns about investment returns, volatility, the low-yield environment and potential for inflation,” Mr. Holmes said.
The dollar value in hirings increased significantly in the last three quarters of 2011. The first quarter had $37 billion in hires, while the second, third and fourth quarters had $51.3 billion, $44.5 billion and $52.5 billion, respectively.
“I think (the decrease in domestic equity mandates) reflects some things that we all know. It gives us some real numbers to connect with behind the things that we all know are going on in the institutional marketplace,” Mr. Holmes said. “The volatility in the equity markets over the last five years or as well as performance in the equity markets has been painful to defined benefit plans in particular and all institutional investors” in general. “These numbers show the extent to which these issues are being addressed in the institutional investor market.”