Survey: Old Wine in New Bottles

HedgeCo News - Retirement plans, endowments, foundations and other large investors are looking for hedge funds, funds of hedge funds and investment managers with strong capabilities in global and emerging markets, according to the 2011 Consultant Search Forecast.

This year’s survey, “Old Wine in New Bottles,” polled 55 leading investment consulting firms in the U.S. and Canada responsible for $10.4 trillion in assets under advisement. This was the fifth annual poll conducted jointly by eVestment Alliance (eVestment) and Casey, Quirk & Associates.

Three key trends include:
- Ongoing portfolio globalization
- The increasing role of “alternative” investments—hedge funds, private equity and real estate
- A greater emphasis on outcome-oriented portfolios constructed by risk budgeting and return attribution

Additional significant findings of this year’s survey include:
- More than one-third of consultants expect more emerging markets equity and less international developed markets activity for the remainder of the year
- More than half of U.S. equity, U.S. bond and EAFE searches will involve manager replacements in 2011
- Half of those surveyed expect an increase in institutional interest in inflation hedging strategies this year
- More than one-third of investment consultants surveyed anticipate a boost in liability driven investing (LDI) mandates in 2011
- Three-fifths of consultants expect moderate or strong bond search activity this year
- Consultants expect significant increases in private equity and real estate mandates in 2011

“A sluggish growth in search activity is to be expected, as many in the institutional investment industry emerge from the policy rebalancing many conducted during late 2009 and 2010, following the global financial crisis,” Heath Wilson, eVestment Principal and Founder, said. “eVestment and Casey Quirk hope that the latest search expectations provide a clear picture on how North American institutional investors should adapt to the changing investment frameworks and increasingly competitive environment.”

"One of the more interesting findings in this year's consultant survey is the rising interest in private equity and real assets," Yariv Itah, Casey Quirk Partner, added. "Institutional investors increasingly manage toward outcomes rather than just excess return, and they want asset managers who can use illiquid investments to mitigate inflation risk and manage liabilities."