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Over the last few years, we have seen investors increasing their allocations to both private markets and sustainable investment strategies as they look for ways to prepare their portfolios for the future.
We don’t see private markets and sustainability as distinct but complementary strategies within an investment portfolio. By considering the two, we think investors can make more informed choices with respect to their long-term strategy, potentially enhancing returns whilst minimizing the downside. We believe that private markets are a natural home for sustainability strategies, owing to the typically longer hold periods and greater degree of involvement, which underlying fund managers have in their portfolio companies.
We believe a sustainable investment approach is more likely to create and preserve long-term investment capital and more specifically that:
Introducing Mercer's sustainable opportunities private markets solution
Many investor face difficulties when seeking to implement to sustainable investments through private markets. In response, we have developed our own sustainable opportunities portfolio to provide access to a diversified range of highly rated managers across the full range of environmental and social themes, asset classes and geographies.
The portfolio seeks to deliver strong risk-adjusted returns from the targeted opportunity set of investments expected to benefit from the global shift towards a lower carbon economy and the need to address resource scarcity issues. The portfolio seeks exposure to environmental and social themes, which broadly align with a number of global standards including the UN Sustainable Development Goals.
Portfolio core investment themes
Key characteristics of the solution
The strategy focuses on infrastructure (typically a renewable energy but also other types of sustainable infrastructure) and private equity (typically buy out, growth and venture capital). However, is also encompasses sustainable real estate (e.g. affordable housing), natural resources (e.g. timber and agriculture) as well as private debt. The strategy focuses on developed markets but can also allocate to other regions given the nature of the opportunity set in sustainable investing. The structured approach to portfolio construction is another characteristic feature of our proven investment strategy. We aim for optimal diversification across risk/return profiles, investment styles, vintage years, regions, sectors and types of investment, as well as managers and individual assets.
via Primaries and Secondaries,
excluding Co-Investments
Private Markets Portfolio with a Sustainability Theme
7-10% p.a.
* Only sustainability focused strategies
All target allocations or returns and projected portfolio diversifications are for informational purposes only. There is no guarantee that the Fund will be able to implement its investment strategy and attain the allocations, returns, or diversifications presented.
Private Markets ~$124bn
Hedge Funds ~$55bn
Private Markets ~$15bn
Hedge Funds ~$7bn
Private markets ~150
Hedge Funds ~50
* Assets Under Management and Assets Under Advisement as of December 31, 2019. Please see Important Notices for important information about Assets under Management and Assets under Advisement. Private markets assets based on committed capital. Hedge funds and other alternative assets based on Net Asset Value (NAV). Dollar amounts in USD. Excludes fee compliance assets. Due to rounding, totals provided may not precisely reflect the absolute figures.
** As of January 31, 2021; excludes administrative personnel.
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