After a tumultuous year, Mercer, the big asset consultant and multi-manager, has abandoned its three-year-old united Asia Pacific strategy, resulting in significant personnel changes at the top of its key investment areas.
Stephen Roberts, the head of investment consulting and investment management for the Asia Pacific region, left the company effective December 31, his role made redundant by the global restructure which has grouped Australia and New Zealand in with Europe, while the rest of the APAC region, including Japan, has been grouped within a new “Growth Markets” division.
At the top of the region’s org chart, the former managing director of Asia Pacific for all of Mercer, Peter Promnitz, also retired at the end of December. He has been replaced, as managing director of Australia and New Zealand, by David Anderson.
Promnitz, a highly regarded actuary who had led Mercer for five years,announced his planned retirement after the global restructure was foreshadowed mid year. Opinions differ within Mercer as to whether the restructure was the prompt or a timely excuse for Promnitz’s retirement. However, he is maintaining a non-executive director’s position with the firm as the first independent chairman of the parent company in Australia, Marsh McLennan.
Simon Eagleton, the former Asia Pacific head of investment consulting, who had been based in Singapore until about last July and who reported to Sydney-based Roberts, is the new head of investments – investment consulting and investment management – for Australia and New Zealand. Tim Jenkins, a Sydney-based actuary who was Asia Pacific head of retirement, risk and finance, has been appointed head of investments and retirement for Growth Markets (Asia plus the Middle East and Africa).
Both Eagleton and Jenkins are long-time Mercer executives and their appointments are perceived as a calming influence for the firm following its global restructure and the separate cost-cutting program and redundancies which have occurred, particularly in Australia, in the past 18 months.
To many imbued with the traditional Mercer culture, Roberts, who joined Mercer initially in the newly created position of Asia Pacific business leader for investment management in April 2010 and who presided over the recent cost-cutting, was an outsider. He had previously headed up sales and marketing at Russell Investments in Australia and then became a non-executive director of the retail-orientated consulting firm of van Eyk Research. The van Eyk position coincided with a major falling out between the largest shareholders, Mark Thomas and Stephen van Eyk, which ended up in court. Thomas won the day.Roberts resigned as non-executive director and Stephen van Eyk sold his shares and left.
Roberts was promoted to Asia Pacific regional head of investments at Mercer in 2011 when the firm, controversially, combined investment management with investment consulting. This decision, with its ‘Church and State’ implications, led to the first senior departures, including consultant Andrew Harrex and head of investment management Gary Burke, now in a senior position with former Mercer client Future Directions. The ongoing poor investment climate coupled with structural changes in the institutional market, especially in Australia, led to further senior redundancies and resignations last year. These included the resignations of the two most senior Mercer Sentinel executives in the region, Lounarda David and Marian Azer, and the retrenchment of long-time Mercer consultant Marianne Feeley and former head of alternatives, DragnaTimotijevic, last October.
The restructure of the worldwide business and geographical realignments from Mercer’s perspective were instigated by Julio Portalatin, who was hired in January last year as worldwide president and CEO of Mercer after a long career at the big insurer American International Group. The splitting up of Asia Pacific is the most significant change. Australia makes up roughly half of the institutional pensions market within Asia Pacific ex-Japan. It is the biggest single market in the region, including Japan, and the most transparent and contestable from the position of a service provider such as Mercer.
Portalatin decided to reduce Mercer’s geographical divisions from four to three. The former structure was: the US, Asia Pacific, Europe, and Latin America and Canada. The new structure is: North America (including Canada), Europe and the Pacific (Australia and New Zealand), and the Growth Markets (rest of the world).
But, given Mercer has four global business lines, it took some months before it became clear how the new matrix would work. The business lines are: health, talent, retirement and investments (investment consulting plus investment management).
Roberts says there was much toing and froing on whether the business lines should be forced to match the new geographical structure but by about last October it had become clear that Portalatin wanted a direct match. This meant that the four business line leaders for Asia Pacific had to find new roles within the firm or leave. In Roberts’ case, he was asked whether he would relocate from Sydney but he chose not to for family reasons. He left the firm.
The two big problems Roberts faced at Mercer were the impact of the global financial crisis in the region and the structural shift to fewer and larger superannuation funds in Australia. Australian super funds are growing faster than all other pension funds in the world (according to independent data from Towers Watson), thanks to compulsory contributions, which are slated to rise to 12 per cent of wages and salaries in the next couple of years. Super funds no longer require generalist asset consultants. They have expanding internal teams and tend only to seek external advice of a specialist nature.
Graeme Mather, who remains head of the investment consulting part of the investments division in Australia and New Zealand, says Mercer is not downsizing. Its investments division in Australia maintains a headcount of around 120. He points out that there have been several senior hires in the past 18 months, including the purchase of Ray King’s three-person alternatives advisory firm, Sovereign Investment Research, and recruitment of Karen Chester as head of infrastructure.
“We had a look at where our revenue was coming from and it was clear that there was ongoing consolidation in the super market . We have been successful in diversifying the business with more insurance companies, endowments and charities and in growing wealth management (retail intermediaries),” he says.
He says the recent forced departures at Mercer were targeted and reflected the firm’s need to adjust to the changing market.
“The role of the generalist asset consultant is not what the bigger super funds are looking for. We need to provide more specialist advice.”
As a footnote: The one constant for Mercer and its clients throughout this period has been Tony Cole. The former head of investment consulting with the firm, a former Commonwealth Treasury secretary and industry statesman, who has been gradually moving towards retirement for several years, still comes into the office one day per week, doing what he likes to do and upholding that traditional Mercer culture as much as he can in the new world order.