in the one field that refuses to rationalise
Interest rates are not the only thing going up in Australia in defiance of the rest of the world. While the transition management marketplaces of London and New York have seen a number of investment banks exit, or at least ‘transition transition’ into their custody or asset management affiliates, in Australia the broker-dealers are standing strong, and in 2009 have even been joined by new competitors claiming ‘purer’ models.
Yet this abundance creates a problem for the chief investment officer wanting to move from Manager A to B. At least a dozen competitors are marketing seriously in Australia, and putting as many different spins on their service while doing so. These spins range from broker-dealer to pure agency multi-broker, asset manager, liquidity arranger, or project manager/consultant.
So, a CIO could spend as long determining the right transition manager as they did deciding to transition in the first place. MICHAEL BAILEY gets some guidance from consultants, and asks the transition managers (TMs) themselves, about how best to differentiate and negotiate in the transition management milieu.
The murky dozen: Who’s who in transition management
You know something is complicated when somebody can get paid to consult on it. Former Intech managing director, Brett Elvish, has found so many chief investment officers confused about the ever-expanding range of transition options available to them that he’s been able to begin running transition manager due diligence projects in addition to his custody advisory work. There are worse times to be in the transition business. At this point last year, the only transition most funds wanted to make was cash out of their dwindling equity portfolios, cash in to their currency hedges or private equity capital calls.
Faced with a market in paralysis and record high trading costs, about the best transition managers could hope for was the odd ‘interim’ mandate for investors who’d pulled their money from an imploding manager, but couldn’t decide what to do with it next. Then equity markets and decent liquidity turned up before Easter, and what had been a trickle of fixed income transitions turned into a steadier stream of asset allocation changes and switches from passive to active equity mandates, as funds attempted to make up some of the $25 billion they had lost on the ASX. Sorting through a dozen transition management competitors may appear daunting, but Elvish says the most important differentiator among them is easy to determine and understand.