Taking the temperature of Large Asset Owners: this year’s Barometer survey

Eimear Walsh , European Head of Investments, Wealth

Every year we conduct our Large Asset Owner Barometer survey to understand the thinking of large asset owners and foster a discussion around the challenges they are facing. Our questions incorporate topics identified in our Global Risk Report, along with other critical areas such as shifts in asset allocation, governance, and sustainability.

We aim to provide a deep level of insight into the thoughts and actions of those managing the largest portfolios, so it’s crucial that we ask the right questions.

We revisit our question set annually to ensure it reflects the topics that are top of mind for large asset owners. In this article, I will highlight some of our key areas of focus for this year.

Optimizing the operating model

Perhaps 15 years ago, building an in-house team and managing assets internally was often considered the most efficient and cost-effective way to run a large portfolio. However, times have changed, and we regularly receive inquiries from clients looking for ways to improve governance, reduce costs and achieve better outcomes.

This shouldn’t be surprising. Our last survey found that 41%1 of LAOs preferred to outsource their investment management entirely, citing benefits such as access to a greater range of skillsets, reductions in cost, and lowered reputational and governance risk as part of the appeal.

The landscape has only grown more complex since, particularly in private markets, where the range of managers and solution types has grown significantly. The survey will offer new insight into how the debate around governance has evolved over the last year, including the extent to which LAOs are outsourcing investment management, and which assets they are delegating.

Assessing the state of sustainability

Sustainability remains a recurrent theme in our discussions with large asset owners. It is recognized as critically important, and our last survey found that over half (52%)1 of LAOs had set science-based net-zero targets. However, implementation challenges persist, and it’s not yet clear to what extent asset management flows reflect this trend.

That said, sustainability – and the climate transition in particular – is attracting attention as a potential driver of investment return in the coming years due to the increased need for capabilities in areas such as carbon capture and battery storage. This year’s survey will explore a range of areas related to sustainability to build an accurate picture of how LAO views are evolving.

Developments in private markets

In recent years, we have seen increasing appetite from LAOs to allocate their alpha budgets to private rather than public markets, driven by a combination of active manager underperformance in public markets and the growing range and sophistication of private markets solutions targeting LAOs. We’ve seen continued demand for private debt in particular, where yields have remained attractive, along with a growing emergence for products that offer enhanced liquidity.

The results of our survey, set to be published in March next year, will provide critical insights into these and other evolving trends. We encourage and would appreciate all large asset owners to participate. Responses are aggregated, anonymized, and the insights shared will be valuable in shaping how the investment industry approaches the year ahead.

Please take part in the survey here: https://legato.mercer.com/jfe/form/SV_7PvMMnA3GdR9Y8u

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1 All responses are sourced from the Large Asset Owner Barometer 2024 survey.? Responses provided were provided by 61 large asset owners (defined as having approximately $5bn or more in assets). It is important to note that these large asset owners did not receive any form of compensation. It is important to recognize that survey results are subject to inherent limitations and uncertainties. The survey results may not capture all relevant factors or market conditions. These results should not be construed as personalized investment advice.?

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