Critical thinking

In this episode (date of recording: February 28, 2025), Lisa Kots, Head of US Wealth Management Portfolio Management at Mercer, is joined by Rupert Watson, Global Head of Economics and Dynamic Asset Allocation, and Julius Bendikas, European Head of Economics and Dynamic Asset Allocation. Together, they explore the global economic outlook for Q1 2025, analyzing key market trends, potential risks, and investment opportunities in the months ahead.

This content is for institutional investors and for information purposes only. It does not contain investment, financial, legal, tax or any other advice and should not be relied upon for this purpose. The materials are not tailored to your particular personal and/or financial situation. If you require advice based on your specific circumstances, you should contact a professional adviser. Opinions expressed are those of the speakers as of the date of the recording, are subject to change without notice and do not necessarily reflect Mercer’s opinions. This does not constitute an offer or a solicitation of an offer to buy or sell securities, commodities and/or any other financial instruments or products or constitute a solicitation on behalf of any of the investment managers, their affiliates. For the avoidance of doubt, this is not formal investment advice to allow any party to transact. Additional advice will be required in advance of entering into any contract. 

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In this episode of Critical Thinking, Jo Holden, Global Head of Investment Research and Advisory at Mercer, is joined by Leslie Maasdorp, CEO at British International Investment (BII) and Matt Robinson, Head of Private Capital Mobilisation at BII, to explore the world of development finance institutions (DFIs), capital mobilisation, and how DFIs can open up new investment opportunities for institutional investors in emerging markets and developing markets (EMDEs).

Investment flows into EMDEs remain far below the levels needed to support development and combat climate change. The Independent High-Level Expert Group (IHLEG) on Climate Finance estimates that these countries, excluding China, will require $1 trillion annually by 2030, rising to $1.3 trillion by 2035. While these regions offer diversification benefits and strong impact potential, global investors often perceive them as too high risk, with current flows only just surpassing $100 billion annually. Bridging this gap will require a strategic blend of public and private investment.

Key takeaways include:

• What is meant by mobilisation and why it matters: Mobilisation refers to attracting and effectively deploying private capital alongside DFIs to increase investment in markets that typically do not meet institutional investors' risk/return profiles. Mobilisation is essential in scaling climate action within EMDEs, where climate change effects are most severe. This need for partnership was underscored by the UK Prime Minister's announcement of a £100 million Mobilisation Facility, managed by BII, to facilitate private investment in EMDEs. With EDME's expected to play a crucial role in global economic growth, investing in these markets creates investment opportunities for growth, diversification and impact.
  
  
• How this facility addresses some of the challenges investors face when considering investment in these markets: As BII's first concessional mandate that offers derisking opportunity for third-party investors, the facility plays a critical role in bridging the 'relative value gap' between institutional investors' risk appetite and the risk profile of BII's portfolio. By offering significant risk mitigation, it encourages greater investor participation-essential for achieving climate impact at scale. A key feature of the facility is its high-risk tolerance- with BII's capital able to absorb potential capital erosion, reducing downside risks for institutional investors.
  
  
• The type of risks that this facility will help mitigate and the investments this will open up to institutional investors: BII will accept below-market returns to boost private investor returns or provide credit enhancements through guarantees or insurance, helping to de-risk investments without distorting the underlying market. This will enable institutional investors to test, seed, and scale climate-focused technologies, businesses, and investment strategies with transformational impact across Africa, Asia, and the Caribbean.
  
  

This content is for institutional investors and for information purposes only. It does not contain investment, financial, legal, tax or any other advice and should not be relied upon for this purpose. The materials are not tailored to your particular personal and/or financial situation. If you require advice based on your specific circumstances, you should contact a professional adviser. Opinions expressed are those of the speakers as of the date of the recording, are subject to change without notice and do not necessarily reflect Mercer's opinions. Read our full important notices - click here

In this episode of Critical thinking, Michel Meert, European Consulting Leader for Endowments, Foundations and Family Offices, is joined by Marieke de Roo, European Sales Leader for Endowments, Foundations & Single-Family Offices, and Teena Jilka, Senior Investment Adviser to explore what's top of mind for single-family offices over the next year and beyond. As inflation moves back toward target rates, the prospect of a soft landing seems increasingly likely. This shift in outlook is prompting investors - particularly single-family offices, which focus on long-term positioning - to consider what comes next.

Key takeaways include:

• Next-generation infrastructure: The role of infrastructure has evolved beyond the traditional use in a portfolio as the range of assets that it captures is much broader. Areas such as EV charging networks and data centres have the potential to create a compelling opportunity for family offices with a relatively longer-term investment horizon.
• Hedge funds as a potential driver of absolute return and diversification: As investors grapple with overconcentration in global equity markets, particularly the US, as well as heightened volatility, diversification is top of mind for family offices. Hedge funds may offer flexibility to capitalize on market volatility and market dislocation, which could make them potential alternatives to fixed income, given the higher for longer expected rate environment.
• How family offices can structure their governance and investment processes: In this period of high volatility, having an investment committee with clear policies, guidelines, and risk tolerance levels is essential to help ensure disciplined decision making, focused on long-term objectives.

Citations
Blackrock. "Adding structure to your portfolio with infrastructure," 2023.

This content is for institutional investors and for information purposes only. It does not contain investment, financial, legal, tax or any other advice and should not be relied upon for this purpose. The materials are not tailored to your particular personal and/or financial situation. If you require advice based on your specific circumstances, you should contact a professional adviser. Opinions expressed are those of the speakers as of the date of the recording, are subject to change without notice and do not necessarily reflect Mercer's opinions.
This does not constitute an offer or a solicitation of an offer to buy or sell securities, commodities and/or any other financial instruments or products or constitute a solicitation on behalf of any of the investment managers, their affiliates. For the avoidance of doubt, this is not formal investment advice to allow any party to transact. Additional advice will be required in advance of entering into any contract.
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In this episode of Critical Thinking, Sinead Leahy, Co-Head of Cardano Advisory is joined by Nick Gibson, Managing Director, Cardano Advisory, and Dan Jackson, M&A Senior Principal at Mercer, to explore the key findings from our recent report, ‘Unlocking value and opportunities from UK pension funds – a private equity perspective’.

There has been a significant shift in the Defined Benefit (DB) landscape in recent years, with many schemes moving from a deficit position to surplus. Surveying over 100 private equity (PE) firms, we uncovered the opportunity for private equity to unlock value from UK pension funds.

Key takeaways include:

• The M&A opportunity from better funded DB schemes: pension schemes moving from a deficit to surplus means that schemes are no longer a blocker to M&A activity but rather a potential value driver, making a target business more attractive. Moreover, better funded schemes may mean less regulatory involvement in a deal, and less risk of deal value leakage.

• Investors are seeking to access surpluses: Companies can often access pension surpluses when a scheme is wound up via a transfer to an insurance company, however, the government recently announced upcoming reforms that are designed to facilitate the release of surpluses on an ongoing basis. Many companies are delaying insurer ‘buyouts’ to capture the potential upside, while some are already using surpluses to help fund their Defined Contribution (DC) schemes.

• What can be done to channel more pension money into PE: While mature, closed DB schemes have reduced investments into illiquid assets such as Private Equity, there are potential opportunities for greater allocations into private capital across open DB schemes, Local Government Pension Schemes, and DC schemes. The upcoming UK Pension Schemes Bill may facilitate consolidation of these pension schemes, which is designed to incentivise them to invest in a broader set of assets, such as private capital. At the same time, greater trustee education and engagement between pension funds and the PE sector will be crucial to unlocking further investment.
 
Citations:
1. M&A extends its reach in 2025 | Barclays IB (04:14-04:19)
2. DAS Design Center (04:14-04:19)
3. M&A outlook shows firming US 2025 deal market activity | EY – US (04:14-04:19)
4. 2025 M&A Outlook: 4 Trends Driving an Anticipated Rebound | Morgan Stanley (04:14-04:19)
5. UK and European M&A: Predictions for 2025 | Katten Muchin Rosenman LLP (04:14-04:19)
6. Chancellor’s Mansion House Reforms to boost typical pension by over £1,000 a year - GOV.UK (17:16-17:30)
7. PE Survey

This content is for institutional investors and for information purposes only. It does not contain investment, financial, legal, tax or any other advice and should not be relied upon for this purpose. The materials are not tailored to your particular personal and/or financial situation. If you require advice based on your specific circumstances, you should contact a professional adviser. Opinions expressed are those of the speakers as of the date of the recording, are subject to change without notice and do not necessarily reflect Mercer’s opinions.

This does not constitute an offer or a solicitation of an offer to buy or sell securities, commodities and/or any other financial instruments or products or constitute a solicitation on behalf of any of the investment managers, their affiliates. For the avoidance of doubt, this is not formal investment advice to allow any party to transact. Additional advice will be required in advance of entering into any contract.

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In this episode of Critical thinking, Cara Williams, Senior Partner and Global ESG and Sustainability Leader at Mercer, is joined by Lovey Sidhu, Sustainable Investment Specialist in Mercer's Global Strategic Research Team, and Daniel Klier, CEO of South Pole, to explore the dynamic challenges and potential opportunities in the evolving carbon market.


The discussion addresses the elements needed for carbon markets to function effectively, the importance of identifying high-quality projects, and the outlook on carbon markets as they mobilize private capital for climate action over the coming years.


Citations:
European Commission. What is the EU ETS? 2024.
Reuters. Voluntary carbon markets set to become at least five times bigger by 2030, January 2023.
Mc Kinsey. A blueprint for scaling voluntary carbon markets to meet the climate challenge, January 2021.
Bloomberg. New energy finance on future demand scenarios, February 2024.


This content is for institutional investors and for information purposes only. It does not contain investment, financial, legal, tax or any other advice and should not be relied upon for this purpose. The materials are not tailored to your particular personal and/or financial situation. If you require advice based on your specific circumstances, you should contact a professional adviser. Opinions expressed are those of the speakers as of the date of the recording, are subject to change without notice and do not necessarily reflect Mercer's opinions.
This does not constitute an offer or a solicitation of an offer to buy or sell securities, commodities and/or any other financial instruments or products or constitute a solicitation on behalf of any of the investment managers, their affiliates. For the avoidance of doubt, this is not formal investment advice to allow any party to transact. Additional advice will be required in advance of entering into any contract.
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Navigating the challenges of modern pension provision requires employers to effectively communicate and implement changes in pension plans while keeping employees' best interests at heart.

In this episode hosted by Mercer's Tej Patel, Fiona Brown shares her own views on the evolving landscape of employer retirement offerings, based on her decades-long experience in the sector, most recently at Rolls Royce. Key insights include redesigning plans to make them future-fit, ensuring employees feel financially secure as they plan for retirement, and the role of employers in fostering trust.

This content is for institutional investors and for information purposes only. It does not contain investment, financial, legal, tax or any other advice and should not be relied upon for this purpose. The materials are not tailored to your particular personal and/or financial situation. If you require advice based on your specific circumstances, you should contact a professional adviser. Opinions expressed are those of the speakers as of the date of the recording, are subject to change without notice and do not necessarily reflect Mercer's opinions.

This does not constitute an offer or a solicitation of an offer to buy or sell securities, commodities and/or any other financial instruments or products or constitute a solicitation on behalf of any of the investment managers, their affiliates. For the avoidance of doubt, this is not formal investment advice to allow any party to transact. Additional advice will be required in advance of entering into any contract.

Read our full important notices - click here

In this episode of Critical thinking, Amit Popat, Global Head of Financial Institutions at Mercer, is joined by David Morrow, European Insurance Proposition Leader, and Stephanie Thomes, a Senior Investment Strategist in Mercer’s Insurance team, to explore Mercer’s outlook for insurers in 2025. This year’s paper reflects a transitional phase for the economy, defined by shifts in structural factors such as monetary policy, geopolitical uncertainty, and technological and regulatory innovation that requires a broader and longer perspective. These challenges will require thoughtful navigation, particularly for investors with a longer-term investment horizon, such as insurers. 

Key takeaways include: 

• How investment risk can serve as a stabilising force for insurers: When underwriting results are under pressure from increased claims and reduced premium income, investment risk can be strategically advantageous because there’s limited correlation between economic cycles and underwriting cycles. While underwriting performance is influenced by market conditions and competitive dynamics, investment returns can provide a stabilizing effect.  
• What strategies insurers can adopt to navigate a challenging environment, where recent fluctuations in interest rates have affected bond-oriented portfolios: There is considerable uncertainty about the direction of travel for markets in general, so insurers should consider modelling how their portfolios would perform under various scenarios, and to increase diversification, within the confines of acceptable risk and regulatory capital constraints.  
• How the growing number of semi-liquid and evergreen fund structures in private markets is changing the landscape for insurers: As private markets continue to evolve to meet the news of their investor base, semi-liquid and evergreen funds make it easier for small investment teams to participate in private markets, making it easier to maintain a target percentage allocation, relieve some of the administrative and operational burden of re-ups, and can relieve blind pool risk.  

This content is for institutional investors and for information purposes only. It does not contain investment, financial, legal, tax or any other advice and should not be relied upon for this purpose. The materials are not tailored to your particular personal and/or financial situation. If you require advice based on your specific circumstances, you should contact a professional adviser. Opinions expressed are those of the speakers as of the date of the recording, are subject to change without notice and do not necessarily reflect Mercer’s opinions.

This does not constitute an offer or a solicitation of an offer to buy or sell securities, commodities and/or any other financial instruments or products or constitute a solicitation on behalf of any of the investment managers, their affiliates. For the avoidance of doubt, this is not formal investment advice to allow any party to transact. Additional advice will be required in advance of entering into any contract. 

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In this episode of Critical Thinking, Jo Holden, Global Head of Investment Research at Mercer, is joined by Nick White, Global Strategic Research Director, and Matthew Scott, Strategic Research Principal, to explore Mercer's "Themes and Opportunities 2025" paper, specifically focusing on this year's theme, "Swing State." This concept reflects an economy in transition, driven by shifts in monetary policy, supply chain dynamics, and technological innovation. These forces require investors to adjust their strategies, embracing diversification and preparing for a broader range of scenarios. Key takeaways include: 

• Private Markets De-Siloing: The report highlights changes in private market dynamics, with slower distributions and longer holding periods. There is a growing case for emerging markets (EM) over US investments, signaling the need for broader diversification.
• The security of everything: The interconnection between security and sustainability, rising dissatisfaction in institutions, with increasing political instability requiring careful risk management.
• Circular Economy: The importance of the circular economy, noting its potential to create new investment opportunities as businesses increasingly adopt sustainable practices to minimize waste and maximize resource efficiency.

Citations: Investment consultant of the year & Thought leadership paper on sustainable investing, Global: Mercer :: Environmental Finance

Completing the Picture - How the circular economy tackles climate change.pdf


Opinions expressed are those of the speakers based on market conditions as of the date of recording, are subject to change without notice and do not necessarily reflect Mercer's opinions. This does not constitute an offer or a solicitation of an offer to buy or sell securities, commodities and/or any other financial instruments or products or constitute a solicitation on behalf of any of the investment managers, their affiliates. For the avoidance of doubt, this is not formal investment advice to allow any party to transact. Additional advice will be required in advance of entering into any contract. Read our full important notices - click here

For the past 16 years, Mercer has been benchmarking retirement systems across the globe. The Mercer CFA Institute Global Pension Index 2024 uses more than 50 indicators to assess adequacy, sustainability and integrity across the world's pensions systems, highlighting their relative advantages and suggested areas for reform.

In our latest episode, David Know, Senior Partner at Mercer, is joined by Holly Verdeyen, US Defined Contribution Leader, Mercer, and Paul Andrews, Global Benefits Consulting Director at Benefex, to discuss how pension providers, policymakers and employers can improve DC retirement outcomes for members.

Opinions expressed are those of the speakers based on market conditions as of the date of recording, are subject to change without notice and do not necessarily reflect Mercer's opinions.

This does not constitute an offer or a solicitation of an offer to buy or sell securities, commodities and/or any other financial instruments or products or constitute a solicitation on behalf of any of the investment managers, their affiliates. For the avoidance of doubt, this is not formal investment advice to allow any party to transact. Additional advice will be required in advance of entering into any contract. Read our full important notices - click here

Are you a French speaker looking to deep dive on co-investments and secondary market opportunities? In this first episode in French of the podcast "Critical Thinking," host Matthieu Mougeot is joined by investment specialists Maud-Kelly Crapeau and Pierre Luc Gariépy to discuss the growing interest in private market co-investments and secondary investments. They highlight their shorter investment horizons and potential for quicker capital deployment compared to traditional primary funds. Zooming in on the unique roles these strategies play in enhancing portfolio diversification and aligning interests between investors and fund managers, they also address the specific risks associated with co-investments and secondaries, including the need for in-depth knowledge and robust due diligence processes.

The discussion touches on the increasing sophistication of investors in private markets and the regulatory impacts influencing investment decisions in some jurisdictions, particularly in France. The episode provides with insights on how investors can effectively allocate resources to these asset classes, stressing the importance of working with experienced asset managers to navigate the complexities of private market investments.

This content is for institutional investors and for information purposes only. It does not contain investment, financial, legal, tax or any other advice and should not be relied upon for this purpose. The materials are not tailored to your particular personal and/or financial situation. If you require advice based on your specific circumstances, you should contact a professional adviser. Opinions expressed are those of the speakers as of the date of the recording, are subject to change without notice and do not necessarily reflect Mercer's opinions.

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