Transition Management

Over time, mandate and investment manager changes within institutional portfolios are inevitable. It is therefore important to quantify and manage the known implications and costs of such changes, and to be aware of therecognised risks that can otherwise result in unexpected costs.

What does a Transition Manager do?

A professional transition manager will manage the entire process of trading out of existing portfolios and into target portfolios.

When would you use a Transition Manager?

The services of an experiencedTransition Manager can assist greatly if a portfolio changes:

  • asset allocation
  • investment strategy
  • investment managers
  • positioning to accommodate member choice, or
  • the structure of the fund, such as defined benefit to defined contribution

What are the benefits of using a Transition Manager?

Minimise the cost of change

Trustees are becoming increasingly aware of the costs, both direct and indirect,of shifting assets. Many of these costs are quantifiable and manageable. A transition manager will plan, manage and monitor the transfer of assets to ensure that costs are contained.

Managing and monitoring risks

There are a number of risks involved in transferring assets. These include operational risks, risks resulting from delays, liquidity risk, and market movement risk. These can be reduced through centralised project management, specialist investment expertise, sophisticated quantitative and risk modelling, derivative expertise and extensive dealing capabilities.

Fund preservation and portfolio optimisation

Even a temporary change in asset allocation as assets are being transitioned can affect the performance of a portfolio. The faster assets are moved to the target portfolio, the more likely an optimal outcome. A Transition Manager uses sophisticated investment techniques and derivatives to protect the current fund value, mirror the target portfolio and optimise exposure the market during the transfer.

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