Asian asset owners lag far behind their U.S., European and Australian counterparts in embracing outsourced chief investment officer mandates but markets in the region such as Singapore and Japan are poised to narrow the gap, said Rich Nuzum, president of Mercer's global wealth business.
"It's coming to Singapore," Mr. Nuzum said in a keynote presentation to the Investment Management Association of Singapore at IMAS' annual conference on March 8.
"We're seeing the tenders now; we're seeing movement and once there are early adopters for people to point to … it's off to the races," a pattern repeated in country after country overseas, the consulting industry veteran said.
Mr. Nuzum said of the nine asset owner categories Mercer tracks, corporate defined benefit plans is the only one shrinking now while family offices are enjoying the fastest growth — a mix that favors Singapore, a regional hub for family offices.
There are now "more billion-dollar-plus family offices than billion dollar corporate defined benefit plans," he told the conference.
Mr. Nuzum said the growth of Mercer's global OCIO business over the past 12 months — to $242 billion at the end of January from roughly $150 billion — "gives you a sense for how quickly OCIO is growing."
Mercer's traditional advice business — with more than 2,600 advisory clients and combined assets under advisement of $11 trillion — remains healthy and continues to grow, said Mr. Nuzum.
But the firm's discretionary OCIO business and its "research" business — providing its global investment manager database to 170 big institutional clients around the world with 30 to 50 in-house investment professionals apiece — are growing more quickly, he said.
The "talent war" those sophisticated investors are engaged in — fighting to secure and retain investment managers capable of sifting the wheat from the chaff in a daily avalanche of data, as well as hundreds of daily emails from asset managers — can turn a research client into an OCIO client, at times for a sleeve of their portfolio such as infrastructure, noted Mr. Nuzum.
There are "probably a dozen tenders out there now of more than $5 billion (each) for OCIO" assignments, Mr. Nuzum told the conference.
Mr. Nuzum said in an interview following his presentation that only one of those tenders is from an asset owner based in Asia, with institutional investors in North America and Europe accounting for the rest. He declined to name them.
Mercer's efforts to build an OCIO business in Japan since late 2015, meanwhile, had been making slow progress, gathering roughly $100 million in client assets over a two-year period. But Mercer's acquisition in January of Tokyo-based hedge fund multimanager BFC Asset Management Co. — with roughly 50, mostly corporate pension fund clients and $800 million in combined assets — is set to accelerate its push in Japan, said Mr. Nuzum.
He said a number of differences between corporate pension funds in Japan and ones in the U.S. and Europe has limited Japanese demand for OCIO services.
One such difference: Japanese companies typically have an executive whose sole job it is to oversee the company's pension fund, as opposed to western companies where the responsible party may have a range of responsibilities. Those U.S. and European executives with five or six different tasks to oversee have been far more likely to consider outsourcing oversight of their pension funds, Mr. Nuzum said.
But when it's time for Japanese pension fund managers to retire, there's a good chance that a growing number of them — facing the same pressures as their overseas counterparts — will recommend considering an OCIO arrangement, Mr. Nuzum predicted.
