Mercer researches the alternatives

MercerInvestment Consultingwill now rate alternative active Australian fixed income products, choosing the option over conventional active Australian fixed income products, which it ceased recommending to its clients last year.

Mercer clients will now receive research and recommendations on alternative products that, according to Mercer head of fixed income research Simon Romijn, will offer greater value to institutional investors compared to the conventional fixed income products.

Romijn says that fixed income managers are becoming “more creative” in response to criticism that conventional management is too focused on interest rate positioning, and fails to deliver value for investors.

According to the group, conventional active managers have found it harder to generate excess returns due to the increasing difficulties in anticipating interest rate changes in the current low inflation environment.

Romijn said there was evidence that the alternative products were superior, and would offer investors a higher level of value over time.

“One US manager has added value relative to the Australian fixed income benchmark by generating profits from its best global investment ideas. They achieve these results by using a mix of derivatives and non-benchmark strategies,” Romijn says.