Investors look for ways to work assets harder

ARLINGTON, Va., March 02, 2017 -- Leading global advisory, broking and solutions company, Willis Towers Watson’s (NASDAQ:WLTW) institutional clients — which include pension funds, sovereign wealth funds, endowments, foundations and insurance companies — increased their level of investment by almost 20% in 2016, with $71.7 billion invested across different asset classes, and covering allocations made on both an advisory and delegated basis.

“What worked for investors in the past is unlikely to work in the future, so our clients are looking for new, innovative ways to achieve better risk-adjusted returns,” said Brad Morrow, head of Manager Research in North America, Willis Towers Watson. “Finding ways to work their assets harder is at the top of our clients’ agendas, be it through reducing costs, adding diversity or creating bespoke solutions in a much more thoughtful way than in the past.”

Equities remained the most popular asset class with Willis Towers Watson clients in 2016, with around 270 selections across the year representing a total value of $26.8 billion, 25% more than in 2015. Private equity experienced a resurgence, with 75% more selections in 2016 across its clients, but there was also a general increase across other equity strategies such as active global equities, emerging markets and equity smart beta.

“With increasing realization that the current low return environment is likely to make journey plans significantly longer than initially anticipated, clients are spending more time revisiting their equity allocations,” said Morrow. “The attractiveness of adding skill and illiquidity return drivers has increased, but they require more effort from investors. Most active managers do not add value after fees, so the way to achieve success is by accessing skill through concentrated best-in-class portfolios, relentless cost management and using smart beta where appropriate to complement equity exposure.”

Diversifying strategies continued to prove popular, with clients investing $23.6 billion in 2016. The number of selections in infrastructure and real estate increased by nearly 50% for the 12-month period ending December 31, 2016. Liquid multi-asset strategies also saw more than 70% growth during this period.

New allocations to credit strategies remained static in number, with 207 selections, and slightly lower in volume, totaling $14 billion among Willis Towers Watson clients in 2016. Smart beta solutions in credit have regained popularity from only a handful in 2014 and 2015, to 19 different selections in 2016.

“Activity was meaningfully lower in some parts of the credit market, such as developed-market government and investment-grade corporate bonds, reflecting the valuation picture in the current state of significant monetary expansion. However, the credit universe is very wide, and there is scope to retain exposure to the credit risk premium through alternative forms of credit while at the same time introducing more illiquidity and skill in these less efficient areas,” said Morrow.

About Willis Towers Watson Investment

Willis Towers Watson’s Investment business is focused on creating financial value for institutional investors through its expertise in risk assessment, strategic asset allocation, fiduciary management and investment manager selection. It has over 900 associates worldwide, assets under advisory of over US$2.3 trillion and over US$87 billion of assets under management.

About Willis Towers Watson

Willis Towers Watson (NASDAQ:WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 40,000 employees serving more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.

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