Consultant adds most value in Asia

William M MercerÆs recently released internal performance audit suggests fund managers can make a bigger difference in Asia.

Investment consultancy William M Mercer has made a splash by publicizing an internal performance audit, and in it the firm states it has created the most value against Asia benchmarks. This suggests that in the less liquid or mature equities markets of this region, selecting good fund managers makes a bigger difference than in the United States or Europe.

According to the firmÆs statistics (which it acknowledges have not been independently audited), the average value added by Mercer across 45 product categories worldwide was 2.3% per annum - but for Asia Pacific the figure was 4.3%, and for regional equities it hit 5.9%. This contrasts to a mere 0.8% added value in Europe and 1.4% in North America.

The firm believes that in Asia (including the subcontinent) ex-Japan, it provided 3.4% more value than an index against the MSCI Asia Far East AC Free ex-Japan Index. It added 6.9% against East Asia ex-Japan, and 7.5% against East Asia including Japan. It also provided clients 5.9% annual returns above JapanÆs Topix. Mercer also added considerable value against New Zealand equities and Australian small caps.

In other words, if an institutional investor heeded the firmÆs recommendations for choosing fund managers across the globe, it would outperform benchmarks by these amounts. This account does not include transaction costs of switching managers to track the consultantÆs recommendations.

The methodology, encompassing data collected since 1995, uses the firmÆs six-tier rating for each investment product. Mercer calculated the difference between the average compound performance of products ranked first or second, which constitute most earmarked for management searches, and their benchmarks.