The Markets February 17, 2009

DCIO Business Sees Market Effects in ‘08

The average asset manager experienced a 23% drop in assets under management in 2008, according to a new survey of defined contribution investment-only (DCIO) executives by Sway Research LLC.
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A Sway Research press release said the decline in DCIO assets, and subsequently management fee revenue, has forced a majority of DCIO managers to cut DCIO sales and marketing budgets for 2009 by an average of 18%.

In addition, Chris J. Brown, principal of Sway Research, said in the release that a number of strong forces make the DCIO market especially challenging in 2009, including the rise of target-date funds, increased flows to stable value and cash portfolios, pressure on management fees, and a lack of activity in terms of changes to DC plan investment menus.

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Brown said in the announcement that DCIO sales executives still have reason to be positive. As noted in Sway’s recently published “Best Practices in DCIO Sales and Marketing,” the market share of investment-only assets continues to expand in the DC market, and is projected to reach 47% of DC assets in 2012, up from 44% in 2008 (see Fueled by Target-Date Growth, DCIO Firms Up Sales Efforts).

More information is available at www.swayresearch.com.

Deals & People February 17, 2009

Mercer Acquires Callan in Investment Consulting Consolidation

Mercer on Tuesday announced an agreement to acquire long-time industry player Callan Associates.
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A joint announcement from the New York-based Mercer and the San Francisco-based Callan said Callan will be merged with Mercer’s investment consulting business and that the resulting approximately 1,270-employee organization will represent one of the largest players in that niche.

According to the announcement, the transaction is expected to close near the end of the first quarter of 2009. The terms of the agreement were not disclosed.

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“This transaction demonstrates Mercer’s commitment to invest in businesses that provide long-term strategic growth and in high-quality investment consulting services that benefit clients,” said M. Michele Burns, chairman and chief executive officer of Mercer, in the announcement.

“[B]y combining forces with Mercer, a global leader, we can offer clients a wider range of tools and resources, top-notch professional advice and enhanced research, educational and quantitative services,” added Ronald D. Peyton, chairman and chief executive officer of Callan Associates, in the announcement.

Mercer’s existing investment consultant business features about 1,100 employees in 41 offices around the world. The announcement said Callan currently has U.S. offices in San Francisco, Atlanta, Denver, Chicago, and Florham Park, New Jersey.

The combined business will continue to have a presence in those cities in conjunction with Mercer’s U.S. investment consulting offices in New York, Atlanta, Boston, Chicago, Dallas, Los Angeles, Philadelphia, Princeton, Richmond, San Francisco, Seattle, and Washington, D.C.

Mercer is a wholly owned subsidiary of Marsh & McLennan Companies, Inc. Founded in 1973, Callan provides research, education, decision support, and advice to an array of institutional investors through five distinct lines of business: Fund Sponsor Consulting, Independent Adviser Group, Institutional Consulting Group, Callan Investments Institute, and the Trust Advisory Group.

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