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Consultant Mercer Expanding Alt Capability

Date: Wednesday, September 27, 2006
Author: HFN Daily Report

Mercer Investment Consulting is expanding its alternative asset program, the company announced.

The consultant said it is in the process of expanding its alternative investment unit from six people at the start of 2006 to 12 by yearend. The consultant claimed four new people have been added to the unit. Tony Cole, a business development head for the company, did not respond to a request for further comment. It could not be determined who the consultant appointed to the unit.

Mercer Investment Consulting went on to say the "vast majority" of its 2,000 client roster, representing $2 trillion in managed capital, want to put more money into the asset class. The consultant said it expected this demand to "continue to grow over time." A consultant is hired by a pension plan to screen and select each investment manager used by a plan. A consultant will also conduct an asset liability study for a pension fund and help it determine a portfolio allocation model.

The company, which has a well-established traditional asset-management consulting business out of Boston, was the target of a 2003 SEC probe of the pension fund consulting industry. The SEC wanted to see if Mercer Investment Consulting was in the practice of so-called "pay-to-play" manager selection-meaning it selected each investment manager based not a merit but on the money the investment manager kicked back to the consultant. The SEC probe also included Callan, Frank Russell, Segal & Co., Strategic Investment, Summit, Watson Wyatt, and Wilshire. In 2004, Mercer Investment Consulting denied any wrongdoing.

The expansion of the alternative-asset program coincided with an announcement that parent company Marsh & McLennan planned to axe 750 people throughout its organization. Aside from Mercer Investment Consulting, Marsh & McLennan also owns mutual-fund giant Putnam Investments.