UPDATE: Non-core transition managers ‘bowing out’

Investment banks on the fringes of the transition management business may soon start to withdraw, analysts at the Tabb Group told theTRADEnews.com.
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Investment banks on the fringes of the transition management business may soon start to withdraw, analysts at the Tabb Group told theTRADEnews.com.

In its latest report on transition management, ‘The Optimal Transition: Mitigating Risk and Minimising Market Impact,’ the research and consulting firm said it expected number of transition managers who actively pursue transition mandates to drop over the next two years, and that this would happen particularly among investment banks.

Speaking to theTRADEnews.com, Tabb analyst Monica Schulz, author of the report, pointed out that the transmission management business is made up of large, well-established players and those on the fringes. “My understanding is that the firms who are currently on the fringes are in the process of considering bowing out,” she says.

Adam Sussman, director of research at Tabb Group, adds, “The reason we see less competition among the transition managers is that it takes so much effort, so much focus and so many resources to have a proper transition management business that you are either committed to it or you get out. Some players were trying to take their

portfolio-trading capabilities and spin them as a transition management product, and that has failed.”

Nevertheless, the analysts do not believe that any departures will have a big effect on the costs of transition management, simply because much of the market share is concentrated in a small number of large players. “I don’t know that that is necessarily going to have a major impact on bids or rates.”

Nor should a smaller pool of transition managers affect asset managers’ desire to use them. Schulz points out that one of the biggest drivers for using transition managers is the increasingly international and multi-asset-class make-up of asset managers’ portfolios, making transitions too complex for most to handle in-house.

“There are very few asset managers that are going to have any kind of incentive to build a trading platform that can handle such a wide variety of products and geographies,” says Sussman. “They are going to continue to rely on the transition managers.”

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