March seems to be the month where super funds are expected to resume hiring and firing their funds managers and other service providers in earnest. What are the warning signals that should lead to those decisions being made? And how to best proceed with any transition when market volatility is around record highs? Last month, Investment & Technology and J.P Morgan brought together a group of operations specialists from the superannuation and multimanager worlds, as well as consultants and an exchange-traded fund expert, to discuss the best advice they would give to their trustee colleagues. Participants in the roundtable were as follows:
• Marian Azer, principal, Mercer Sentinel • Michael Bailey, editor, Investment & Technology magazine • Rose Challita, program manager, IAG Asset Management • Bryan Gray, head of sales and relationship management, J.P Morgan Worldwide Securities Services • Fenella Gray, investment operations manager, NZ Accident Compensation Corporation • Jim Karelas, vice president of transition management, J.P Morgan • Troy Rieck, managing director of capital markets, Queensland Investment Corporation • Adam Seccombe, head of business development, Barclays Global Investors • Drew Vaughan, principal, Dymond Foulds & Vaughan Michael Bailey: Today we’re hoping to have a good discussion on assessing counterparty risk and how that translates into a transition management decision, particularly in a time of great uncertainty as we’re experiencing in investment markets.
Hopefully today we’ll emerge with some useful advice for I&T readers who are trying to assess risks among their counterparties, including their funds managers. And of course, hopefully some tips for those on the other side of the fence who are being assessed. The uncertainty I mentioned certainly has reduced the volume of transition management business of late. A lot of funds we speak to seem to be a little bit reticent to do all that much at the moment. Probably your $10 billion-plus funds are doing bits and pieces, just because they’ve got the cash flow coming through.
I thought we’d kick off today by asking Jim Karelas, vice president of transition management for J.P. Morgan, based in
Sydney, to share his observations on what sorts of transition activity he’s being seeing. Jim, since the ‘GFC’ took off in earnest around last September, what’s been motivating those transitions? What do you see as triggers for the assessment of counterparty risk in future, and what sorts of transitions might that produce in future? Jim Karelas: The overriding theme of any portfolio restructure is for alpha generation and risk minimisation.