Transition Management Planning & Strategy

Deciding on when and how to transition shouldn’t be left to chance.

The road to transition is often long and can start many months, even years, before changes are executed. We believe that clock starts, once a decision to change has been taken. This is simply because, the period after decisions are made is an opportunity cost. So planning and strategy should consider:

Investment Selection – Understanding the transition / trading constraints of a new investment should be a consideration in manager due diligence. Analysis of liquidity, structural and legal constraints and penalties can highlight significant differences in implementation expense.

Event Shortfall – As mentioned, delays in agreed investment change are risks which need to be measured. Event Shortfall* simply keeps count of the difference between the unwanted and new investments from the point of agreed change. If nothing else, this ensures the “tail” of operations isn’t “wagging” the head of investment returns.

Trigger Points – Deciding on when to make a change often leads to healthy debate. There is little doubt though that timing can be everything and designing a strategy which makes a change at an optimal point, can reap long term benefits. Trigger point monitoring, ensures that all the preparation is set and as the name suggest, starts implementation at a change at pre-agreed price / liability triggers.

Cost Analytics – Pre-trade analysis estimates the costs of buying and selling assets and the risks incurred over the time it takes. Sadly, this is often completed at the 11th hour (or just before a transition starts). Analysis at the planning stage identifies key constraints, including transferability, liquidity, tax etc, which can significantly influence what you do but also who does it for you.

*Event Shortfall is used to measure investment exposure risk, to determine the effectiveness of implementation of decision making. This was conceptualised by State Street Global Markets in 2015.


UK Transition Management Review

There are now only seven firms offering transition management services to clients in the UK and Europe. MJ Hudson has undertaken a detailed survey of all providers to assess the relative strengths and weaknesses of each firm.

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