Introduction to Delegated Solutions
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There are multiple drivers fueling the growth of delegated solutions, including DB freezes, increasing regulation, and the need for specialized expertise in complex investments. Delegated solutions allow clients to transfer fiduciary responsibility and access Mercer's expertise to improve governance, use resources more efficiently, and potentially achieve better investment results. Currently, there is approximately $250 billion in delegated programs in the US, and this is expected to grow to $500 billion by the end of 2016.
Introduction to Delegated Solutions
- 1. Introduction to Delegated Solutions January 2014
- 2. There are multiple drivers underpinning the growth of Fiduciary Management DB Freeze Defined Benefit Loss of Key Staff Defined Contribution Increasing Regulation Increasing investment complexity Delegate / Outsource Endowments & Foundations Wealth Management B-B-C Speed of Execution Niche Asset Classes (eg. alternatives) Cost Control There is approximately $250bn in delegated programs in the US today. By the end of 2016, this number is expected to grow to $500bn MERCER February 27, 2014 2
- 3. Fiduciary role and responsibilities Traditional model versus Mercer’s Delegated Solutions Advisory Model Client Potential with Mercer’s Delegated Solutions Client Mercer Strategy Development Define objectives Strategic asset allocation1 Asset/liability analysis Portfolio structuring1 Implementation Manager selection Manager transition Draft investment guidelines1 Glide Path implementation Funded status trigger execution Ongoing Monitoring/Evaluation Performance reporting Cash flow management Manager compliance Proactive decisions 1 Information provided by Mercer, client makes decision and adopts policy MERCER February 27, 2014 3
- 4. How do clients benefit from delegated solutions YOUR BENEFITS Improved Governance Structure • Proactive, timely decision-making • Quicker response and action, fewer missed opportunities More Efficient Use of Resources • Focus on high-impact, strategic decisions • Delegate day-to-day, time consuming aspects of oversight role Transfer Fiduciary Responsibility • Team of experts accountable for results • Full-time, real-time oversight of portfolio Economies of Scale • Access Mercer’s global buying power • Our fee leverage sometimes pays our fee Potentially Better Results • Potential to improve the client’s risk / reward trade-off • Potential to improve funding level / reduce volatility, improve member outcome, more stable spending policy MERCER February 27, 2014 4