Consultants managing more with discretion to meet investor demand

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Like Wilshire, other investment consultants are seeing more inflows into their combined and separately managed alternative funds.

For example, Mercer Investments LLC, New York, closed its latest combined multi-asset fund – Mercer Private Investment Partners VI – with $4.8 billion in the fourth quarter of 2021, a 78% increase from the previous fund of the series, a press release mentioned.

The fund’s clients include public and corporate pension funds, insurers, endowments and foundations, the press release said, but did not identify any investors.

The fund’s alternative strategies include private equity, private debt, infrastructure, real estate, co-investments, secondaries, credit dislocation and a new diversity, equity and inclusion strategy.

“In a lower expected return environment, asset owners and trustees will likely find it much harder to meet their financial goals going forward,” Raelan Lambert, global head of alternatives, said in the statement.

“Our PIP solution aggregates the purchasing power of clients to achieve greater diversification, providing flexible access to attractive private market opportunities in a cost-effective manner,” added Ms. Lambert.

Mercer’s size gives the firm the power to save on fees and access high-performing alternative investment managers, said Michael Forestner, an Atlanta-based partner and global co-CIO of Private Markets, in an interview.

As of June 30, Mercer had invested a total of $26 billion with discretion in alternative investment managers for clients and had assets under advisory in alternative strategies totaling $164 billion.

Portfolio liquidity is now an issue for asset owners, Forestner said, noting that Mercer’s investment team can customize a portfolio of alternative investments that will provide more liquidity, including private equity. with more flexible redemption conditions for investors.

Mercer’s assets under advisement totaled $17.3 trillion as of June 30, while assets under management were $415 billion as of December 31.

The move by advisory firms to provide their clients with mixed alternative investment funds and discretely managed segregated accounts has upended the business equation for some companies.

“The traditional split for investment consultants was 80% advisory and 20% discretionary, but that’s changing,” Cliffwater’s Mr Nesbitt said.

Cliffwater’s core business remains advising U.S. institutional investors across all alternative investment asset classes, Nesbitt pointed out, but he noted that the firm has decided to distribute its alternative multi-manager funds in the wealth management with an emphasis on registered investment advisers.

Cliffwater launched two combined funds registered under Bill 40, starting with a diversified direct lending fund in 2019 and a specialized credit fund in 2021. Investment in the funds is restricted to accredited investors.

“Wealth management is a step up from retail and these businesses need both advisory help and funds capable of accepting smaller allocations,” Nesbitt said.

Cliffwater’s AUAs were $99 billion as of December 31 and AUMs were $8 billion.

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