Special Reports » OTHER REPORTS » TRANSITION MANAGEMENT ROUNDTABLE

Transition managers are coming under ever-greater scrutiny. Our panel of experts discuss the issues surrounding transition management, such as the controversial T-Charter, and what the future holds within this arena.

Henry Smith: Eugene, you mentioned earlier that you saw the T-Charter as a sort of base standard which will evolve and be enhanced over time. How could the T-Charter be improved, particularly with a view to protecting the interests of clients?

Paula Garrido: For some the involvement of investment banks in transition management shows this can be a very profitable business. Paul, as a pension fund, are you concerned about how much money transition managers are making by managing your transitions?

— Williams: to get rid of market risk, trade in new market as soon as possible

As the use of transition managers increases exponentially, many talk of low volatility, rising costs and the need for professional standards. Tim Cooper assesses the current market environment.

— Mark Dwyer, Mellon Transition Management Services

Mark Dwyer and Wim de Ruijter of Mellon Transition Management Services speak to FT Mandate about the growing trend among institutional investors of hiring transition managers.

Alex Johnstone, managing director at BNY Global Transition Management outlines the different types of transitions to manage, the benefits of transition management and new players in the market.

Lachlan French, head of transition management in Europe for State Street outlines the various principles on offer to to avoid a conflict of interest with your transition manager.

— Jody Windmiller

Jody Windmiller, head of transition management at UBS Investment Bank, outlines exactly what qualities a plan sponsor should be looking for in its transition manager and some practical ways of finding the right service to achieve a smooth, cost-effective transfer.

— Pilcher: the value has been identified

In these current lean times, trustees are realising the importance of transition management in cutting costs and reducing the risks associated with changing strategy, writes Christine Senior.

Transition management is on the rise, with more and more new providers entering the market to challenge the long-established players and grab a share of increased business. The current investment climate has had a major impact. The double digit investment returns of the 1990s meant trustees and guardians of assets were less concerned about cost cutting when managers were comfortably beating their benchmark.

Alex Johnstone identifies the many catalysts for investment structure change and the benefits of selecting the right transition manager to facilitate the activity.

There are many events that drive institutional investors, such as pension funds, to change their investment managers or investment portfolio structures. The three most common ones are:

The design of an appropriate trading strategy is one of the key skills of a transition manager. John Minderides examines the different methods of assessing performance.

Performance measurement and transaction cost analysis can often be confused when assessing the qualities of a transition.

Performance measurement is used to measure fund returns over a period, usually relative to a benchmark.

In figure 3 we plot the actual fund value. Before the transition this is equal to the legacy portfolio, during the transition, the actual fund value is calculated as the value of bought assets plus the value of residual holdings to be sold. For ease of observation the relative performance versus the legacy portfolio is also shown.

As the demand for the services of transition managers has increased, so too has the number of new players, but the more diversified and well-resourced will prevail, says Tim Wilkinson.

The remarkable increase in the numbers of transition management service providers continues unabated. This proliferation has served to ensure that the margin pressure, first introduced by the more aggressive of the investment banks around 2001 remains firmly in place.