Emerging market equities are expected to be the most sought-after strategy in 2013, new research shows.
Casey, Quirk & Associates, an Atlanta-based management consulting firm and eVestment, an Atlanta-based provider of institutional investment data intelligence and analytic solutions, published this finding in a summary of results from a 2013 Consultant Search Forecast. The 7th annual survey includes responses from 35 investment consultants in the U.S., representing $14 trillion in assets under advisement (AUA).
The report indicates that emerging market equities will represent 9 percent of total manager search activity in the U.S. in 2013. This is an increase of three percentage points over the previous year.
The report notes also that private equity, hedge funds, real estate and commodities will drive a combined 24 percent of total manager search activity in the U.S and 28 percent of new or expanded investment mandates this year.
The report adds that U.S. investment consultants expect lower returns from portfolios, forecasting an average return of 6.6 percent in 2013 and beyond. This compares with 2010 expectations of 8 percent.
Concern about volatility, given the current state of economies worldwide, remains high among institutional investors: 75 percent of consultants polled report an elevated client focus on measuring and managing risk. In addition, consultants say their clients continue to seek higher-yielding fixed income strategies.
Consultants forecast emerging markets debt and high-yield fixed income will represent the
third- and seventh-most popular asset classes in 2013, respectively. The also anticipate decreased interest in long-duration bonds.
“Traditional benchmark investing is no longer a sufficient stand-alone vehicle for driving flows into today’s volatile marketplace,” says Benjamin Olmstead, vice president of new product innovation at eVestment. “Managers have to focus on outcomes — not just their strategies — to remain successful and maintain and grow client share.”
In 2012, survey respondents conducted nearly 5,300 searches and placed a total of $400 billion in mandates.