The transition management industry is constantly evolving. The growth slowdown in the developed EMEA region, where there is a continual adoption of transition management by clients, is being offset by an increasing growth rate in Asia.
Additionally, the types of clients using transition management are moving from the traditional realm of insurance companies and sovereign wealth funds to an increasing use of the service by asset managers, but moving down the spectrum to include the clients of those asset managers.
Michael Gardner, regional head of transition management EMEA, J.P. Morgan Worldwide Securities Services, discusses this evolution.
To watch the interview, click here.
Systems are also evolving, he says. A decade ago systems used to enable crossing to avoid market spreads and impacts. Today they enable live marginal risk contribution.
There is a greater emphasis on the risk in transition management too, including how third parties are compensated when any of the operational, asset management or trading functions are outsourced and a greater emphasis on how that is monitored.
Gardner also notes that as transition management continues to evolve, consolidation is becoming inevitable. Increasingly, companies are offering transition management services and a suite of other related services such as interim management and overlay services. These services are being sought by an increasing number of asset managers who see asset allocation as the No. 1 determinant of return.
Transition managers help these asset managers manage exposure through overlay and target allocation services. In five years time, says Gardner, there will only be about a dozen providers that will offer this robust solution on a much larger basis than just a transition. And there won’t be a lot of clients for the providers of traditional transition management, he adds.
(JDC)