The Mercer Investment Trusts are constructed using the guiding principles of our investment beliefs. When designing and managing the funds, we have a process that encompasses:
Each Portfolio’s investment strategy is designed to target a specific performance objective over a specified time period, within the desired risk constraints.
The investment strategy design process focusses on determining a target mix of asset class sectors (asset allocation) that will achieve the Trust’s investment objective, without breaching the risk constraints. Consistent with our belief about diversification, we look to incorporate a wide range of asset classes, including those not usually found in New Zealand portfolios, such as unlisted global infrastructure.
We then stress test each investment strategy to see how it will perform under a variety of challenging market scenarios, such as another Global Financial Crisis or a New Zealand housing crisis.
Mercer does not manage any money in-house. We use our significant scale and extensive global investment manager research to find the best managers from around the globe: our manager research team investigates more than 6,000 investment managers (as at 30 September 2016).
Our Portfolio Management team selects the best of these managers, often combining managers with different styles to capture a broad array of ideas and diversify manager risk. Prior to the appointment of an investment manager, a detailed Operational Risk Assessment Report is prepared to ensure that returns generated through good trading ideas are not lost through poor risk and control.
Mercer continually monitors the investment managers we use and may remove, replace, or appoint additional investment managers for the funds at any time. We hire and fire managers without fear or favour, and do not receive any payments or commission from managers.
A Dynamic Asset Allocation process is used within the Diversified Portfolios, allowing us to make tilts to the target (long-term) asset allocation in response to changing market conditions.
Dynamic asset allocation helps to negotiate the cyclical ups and downs of markets, reducing the risk associated with investing in overpriced assets and benefiting from underpriced assets. The result is a smoother return path and better risk-adjusted returns.
Dynamic asset allocation is not about timing markets and moving funds around on a daily basis. We take a medium-term (one to three year) view, with the expectation that prices will revert to equilibrium over this period.