Institutional investors should turn their attention towards adopting a ‘floating strategic asset allocation’ mind-set if they are to experience healthy returns this year, according to Mercer.

With the eurozone financial crisis set to continue as politicians try to implement a blueprint for a fiscally-responsible Europe, investors are being advised to focus on agility, flexibility and efficiency with regards to their financial planning.

Mercer global director of consulting Divyesh Hindocha said that the floating strategic asset allocation strategy “evolves and morphs over time, in order to grasp opportunities and exploit valuation anomalies”. Hindocha added that investors are expected to “diversify away from expensive sovereign debt into a range of corporate and asset-backed varieties”.

Furthermore, Mercer underlined that in the current financial climate investors will make every attempt to ensure that their capital is handled in the right manner so that agents do not extract unfair rewards. Rising long-term inflation could also spark innovation, with investors seeking income streams with in-built inflation protection.

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