Mercer LLC is counting on a mix of believers in outsourced CIO solutions and new converts to add Asian momentum to the solid growth the firm's delegated investments business is enjoying in the U.S., Europe and Australia.
The New York-based consulting giant launched that business last month in Japan, with plans to push into other Asian markets next year.
Jeffrey Schutes, a senior partner and Mercer's growth markets investment business leader, said in an interview that his firm's new Tokyo-based, five-man delegated investments solutions team, led by former Invesco executive Fumihiko OtsukaMercer Mercer “ahead of our competitors in this space.”
Some analysts counter that Asia's outsourced CIO market is likely to offer relatively slim pickings, reflecting the dominance of big public pension and sovereign wealth funds in the region intent on building their internal capabilities.
The whole outsourcing trend has gotten traction in the U.S. and Europe, but “in this part of the world, we don't really see it,” said Daniel Celeghin, a Hong Kong-based partner and head of Asia-Pacific with Casey Quirk & Associates, Darien, Conn., a consultant to the money management industry.
Mercer's competitors in the region — Cambridge Associates LLC, Russell Investments, Towers Watson & Co. and Aon Hewitt — uniformly describe Asian demand for OCIO services as embryonic, although some suggested more progress tRussell InvestmentsLLC, Russell Investments, TowerAon Hewitt Co. and Aon Hewitt — uniformly describe Asian demand for OCIO services as embryonic, although some suggested more progress thus far than others.
In an e-mail, Chris Ford, Towers Watson's London-based global head of investment, noted a “number of early adopters” in Asia have hired Towers Watson to run alternatives sleeves of their portfolios. He declined to provide details.
Mr. Schutes predicted the ever-growing sophistication of asset owners, and their portfolios, in Japan and Asia more broadly is poised to elevate the region from an afterthought for providers of delegated investment solutions to a more significant opportunity.
For the moment, he acknowledged, most discussions in Asia are similar to ones in the U.S. a decade ago, when “we used to have to define what it was — OCIO, delegated, implemented, discretionary.”
In the U.S. it's already become an accepted — and fast growing — part of the investment landscape, and a “material” part of Mercer's growth, he noted.
Mr. Schutes declined to break down Mercer's current book of delegated investments business beyond saying it has increased to nearly $140 billion from $115 billion at the end of 2014. But at the start of this year, Mercer announced its delegated investment AUM had jumped 34% during 2014, paced by a 39% surge in its U.S. business to $46.6 billion.
Aon Hewitt, a big investment consultant with an almost exclusive focus on the U.S. market, reported strong growth in OCIO this year as well. MacKenzie Lucas, Lincolnshire, Ill.-based spokeswoman, said Aon Hewitt's delegated investment solutions business has jumped more than 30% since the start of 2015 to more than $70 billion.
Paul Deane-Williams, a Towers Watson spokesman, said his firm has garnered perhaps a dozen hefty delegated investment mandates this year, but that business' AUM — to be announced in January — might not be the best barometer of its strength. He noted Towers Watson's success in helping U.K. clients accumulate sufficient assets to move ahead with pension buyouts inevitably affects those year-on-year comparisons.