Mercer Investment Consulting surveyed more than 1,100 European
pension funds with assets under management of more than e538bn. It found that
trustees were pumping resources into managing arrangements in more innovative
ways, such as forming investment committees and conducting formal interim
investment strategy reviews.
Mercer’s European director of investment consulting Nick Sykes said that
keeping on top of their mandate by putting formal governance structures in place
was gaining importance. “As the world of investment becomes increasingly complex
and asset strategies and risk management tools become more sophisticated,
ensuring the investment strategy is set and monitored appropriately is even more
vital to scheme success,” he said.
“Risk management is high up many investors’ agendas, together with an
awareness that market turbulence, while demanding that risk exposure be
understood and controlled, should also lead to investment opportunities as the
year progresses,” added Andrew Kirton, head of Mercer investment consulting in
The study also revealed that global tactical asset allocation, funds of hedge
funds and active currency management were the most commonly used alternative
asset classes by European pension funds and are expected to further increase in
popularity in 2008.
Some of the key findings from the research include:
• Greater focus on risk management;
• Pension scheme exposure to alternative assets expected to increase in 2008;
• Equity exposure continues to drop in the UK, but increase elsewhere in Europe;
• Number of schemes implementing liability-driven investment strategies to
double in 2008. Kirton argued that “the robustness of existing governance and
investment exposures could be tested significantly” in the coming year.
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