Institutional investors are turning to new fixed income investments in the search for yield, according to Mercer’s annual Global Manager Search Trends report.

The research found an increase in the number of manager searches Mercer undertook globally during 2012 (up to 776 from 742 in 2011) and a shift towards non traditional fixed income. Searches for absolute return and emerging market debt managers were among the striking trends.

Mercer’s manager research team partner and technical leader Andy Barber said: “We’ve seen increasing interest in non-traditional fixed income. Investors have been looking to reduce their equity exposure but have been reluctant to add to traditional fixed income holdings, such as sovereign and credit, at current yield levels.”

Investors also looked to a wide variety of asset classes, according to the findings.

“The desire to further diversify growth portfolios is evident from continuing interest in alternatives, with infrastructure in particular attracting an increased proportion of search activity,” he added. Private equity and multi-strategy hedge funds also saw good interest during the year, the research.

Despite a fall in the number of searches, however, global and international equity managers remained most popular and assets placed in these mandates increased by almost 30 per cent. US equity was the second most searched for, followed by emerging markets equity, Canadian equities and global fixed income.

Findings for the UK specifically were broadly similar. Both the number of searches and value of assets placed saw an increase, with investors turning from developed market equity mandates towards diversified growth (international multi-asset) and emerging markets equity and debt. There were also increased searches for alternative strategies utilising private equity.

Despite popularity continuing for global and international equities, there was a clear shift towards fixed income in all forms.

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