Ahead of the Curve covers developments that may impact the behavior and portfolio positioning of institutional investors. Take a closer look at events in the ever-changing regulatory, legislative and investment markets to determine how they may impact you.
Emerging markets will play a bigger role in the private equity portion of institutional portfolios, with Asia and Central and Eastern Europe/Russia receiving the most interest.
The Emerging Markets Private Equity Association’s Survey of Limited Partner Interest in Emerging Markets Private Equity found 42% of respondents expected to increase investments in this category in 2007. Foundation and endowment funds were the most active investors, with an average of 13.2% of their private equity portfolios allocated to emerging markets. Of the investors surveyed, 79% expected to invest in Asia in 2007 and 89% expected to do so by 2012. Among respondents, 61% expected to invest in Central and Eastern Europe/Russia in 2007 and 87% planned to do so by 2012. One-fifth of respondents (20%) were actively or opportunistically investing in Africa this year. The study can be found at empea.net.
Launched in 2006, the University of Chicago Graduate School of Business Initiative on Global Markets (IGM) explores business, financial markets and public policy issues.
Among the research topics to be covered in the coming academic year are the surge in delinquencies in the sub-prime mortgage market and the future of private equity.
In addition to research projects, IGM promotes a greater exchange of ideas between GSB researchers and decision-makers in the private and public sectors. It will do this through conferences, the Myron Scholes Forum of prominent guest speakers, and enhanced interaction with corporate partners so that academics and practitioners can benefit from each other’s insights. Corporate sponsors of the initiative are Northern Trust, AQR Capital Management, Barclays Bank and The Chicago Mercantile Exchange. For more information, go to research.chicagogsb.edu/igm.
Almost one in five defined contribution plan sponsors offers at least one socially responsible investment option to participants, and that number is expected to grow to 60% of sponsors within three years.
Defined Contribution Plans and Socially Responsible Investing in the United States, a survey commissioned by the Social Investment Forum and conducted by Mercer Investment Consulting, found alignment with an organization’s mission was the primary driver for adding an SRI option to a defined contribution plan. Health care organizations and government funds are most likely to offer SRI fund options to participants. For more information, go to socialinvest.org.
The Paris-based Organisation for Economic Co-Operation and Development (OECD) publishes Financial Market Trends twice each year. The publication provides analysis and information on structural issues and developments in major global financial markets.
Articles in the current edition include:
Institutional investors predict that half their U.S. equity trades will be conducted through electronic and portfolio trading systems by 2010. This development could have a significant impact on the research they receive from brokers, according to a Greenwich Associates report.
The 2007 U.S. Equity Investors Study found that blended commission rates for institutional single-stock, program and direct-to-market electronic trades averaged of 3.16 cents per share during the one-year period ended February 2007, down from 3.9 cents in 2006 and 4.0 cents in 2005. As a result, equity brokers are reassessing the amount they spend to provide research and other services to clients. The Greenwich report predicts institutions, in turn, might need to cut back on the research and services they use, persuade brokers to provide the services for less money, or find another way to pay for the services. For more information, go to greenwich.com.
In a new paper, Northern Trust’s Transition Management Team discusses the unique circumstances involved in restructuring defined contribution (DC) plan portfolios. For instance, many plan sponsors consider a blackout period during a transition event, but this is undesirable to participants. The Northern Trust paper outlines steps to ensure a smooth portfolio restructuring. They include:
Download The Defined Contribution Plan Transition paper or contact your relationship manager for copy.