Alternative investments continue to be a key driver of consultant searches this year, according to the 2012 Consultant Search Forecast conducted by eVestment Alliance and Casey, Quirk & Associates.
The survey, released Wednesday, found that consultants expect hedge funds, private equity and real estate to drive 20% of all search activity and 26% of new or expanded mandates. Defined benefit pension plans seem to favor funds of hedge funds, while nonprofit plans prefer direct investing.
Researchers said four themes would power investor search activity in 2012:
- Generating steady income in a low interest rate environment
- Alternatives becoming core positions in portfolios
- The shift to liability-driven investing by corporate pension plans
For the survey, conducted in December and January, eVestment Alliance and Casey, Quirk polled 30 investment consultants representing nearly $10 trillion in assets under advisement. In 2011, the respondents conducted some 5,000 searches and placed a total of $370 billion in mandates.
Other results from the survey include the following:
- High turnover is anticipated for U.S. and international equity mandates and core fixed income, indicating dissatisfaction with incumbents.
- Increased demand is forecast for high yield and long-duration debt, commodities and global stocks.
- Multi-asset class solutions are expected to represent 10% of new search activity in 2012.
- Endowments and foundations seem likely to increase their use of active managers, while demand grows for passive investing among pension plans.
In addition, the survey found that consultants place the greatest value on asset managers with traditional and alternative capabilities who have the ability to fully globalize portfolios, a record of product innovation in creating income and non-correlated investments, and competitive long-term incentives to attract and retain talent.
“This year’s consultant survey indicates asset owners and gatekeepers are making increasing demands from asset managers,’’ Ben Phillips, partner at Casey Quirk, said in a statement. “Investment managers failing to adapt to the changing investment framework will suffer from slower growth.’’