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Mercer seeks partners for UK retail push

US investment consultancy Mercer is in discussions with potential strategic partners to distribute its new multi-manager funds to the UK retail market.

The UK high income, European property and diversified alpha funds are only available to pension schemes, an area of the market that the company has focused on.

Mercer started expanding its multi-manager business into Europe last October and says one or more of the new funds could be made available to advisers in the retail market via insurance company distribution links.

The diversified alpha fund aims for returns of 3 to 5 per cent a year above cash by investing in a range of alternative asset classes including market-neutral equity, currencies, multi-strategy hedge funds and absolute return bond funds.

The UK high income fund is a property fund of funds that aims for absolute returns of 1 to 2 per cent above sterling 15-year gilts on a five-year basis with volatility similar to bonds.

The European property fund aims for absolute returns of 8 to 10 per cent over a market cycle by investing in European property assets including commercial property and property shares. Mercer says property shares will comprise up to 15 per cent of the portfolio to provide liquidity, as it is important for pension schemes to be able to get in and out of the market more quickly than direct property investments allow.

Mercer specialises in manager of managers but believes a fund-of-funds approach is more suitable to multi-manager property portfolios.

European head of investment management Tom Murphy says: “We run manager of managers as a separate account and in the property space this would require a couple of hundred million. Most diversified property funds are funds of funds. You would need at least a billion euros to get diversification through manager of managers.”

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