Industry Trends
1. How many total portfolio transitions (including legacy and
target) did your organization conduct?
| 2015 | 2014 | 1-yr change |
4-yr change |
|
| One | 23% | 25% | -7% | 4% |
| Two | 25% | 21% | 21% | 8% |
| Three | 10% | 10% | 0% | -14% |
| Four | 7% | 9% | -23% | -30% |
| Five | 7% | 8% | -13% | 40% |
| More than five | 27% | 28% | -4% | 1% |
| Average | 5.96 | 5.02 | 19% | 30% |
2. Was the number of portfolio transitions higher or lower this
year than the previous year?
| 2015 | 2014 | 1-yr change |
4-yr change |
|
| More transitions this year | 68% | 45% | 51% | 43% |
| Fewer transitions this year | 26% | 21% | 23% | -15% |
| Same number of transitions | 6% | 34% | -81% | -72% |
3. What was the reason for conducting your transition(s)?
| 2015 | 2014 | 1-yr change |
4-yr change |
|
| Manager performance | 41% | 50% | -18% | -18% |
| Change in manager personnel/structure | 26% | 30% | -13% | 10% |
| Asset allocation shift | 49% | 36% | 37% | -18% |
| Rebalance | 28% | 32% | -14% | 1% |
| Restructure of your fund | 32% | 30% | 6% | -17% |
| Change in fund/manager benchmark | 12% | 10% | 20% | -23% |
| Cash flow, in or out | 20% | 13% | 53% | 109% |
| Other | 6% | 6% | -2% | -26% |
4. What types of securities were transitioned?
| 2015 | 2014 | 1-yr change |
4-yr change |
|
| US equities | 79% | 79% | 0% | 2% |
| Non-US equities | 70% | 57% | 22% | 2% |
| Fixed income | 35% | 30% | 17% | 39% |
| Foreign exchange | 20% | 19% | 5% | 16% |
| Other | 1% | 6% | -83% | -84% |
5. Did you use a consultant to assist/advise you in the
transition(s)?
| 2015 | 2014 | 1-yr change |
4-yr change |
|
| Yes | 34% | 41% | -18% | 8% |
| No | 66% | 55% | 21% | 2% |
| Sometimes | n/a | 3.8% | n/a | n/a |
n/a = not applicable
6. How many transition managers are usually considered for each
transition?
| 2015 | 2014 | 1-yr change |
4-yr change |
|
| One | 24% | 28% | -13% | 2% |
| Two | 42% | 32% | 30% | 39% |
| Three | 28% | 33% | -15% | -24% |
| Four | 6% | 6% | -8% | 29% |
| More than four | 0% | 1% | -100% | -100% |
7. Do you require a transition management agreement to govern
the transition(s)?
| 2015 | 2014 | 1-yr change |
4-yr change |
|
| Always | 90% | 87% | 3% | 5% |
| Sometimes | 6% | 10% | -37% | -17% |
| Rarely | 1% | 2% | -39% | -75% |
| Never | 2% | 1% | 265% | 50% |
8. What kinds of transition trades did you conduct?
| 2015 | 2014 | 1-yr change |
4-yr change |
|
| Agency | 59% | 62% | -6% | 12% |
| Principal | 21% | 13% | 63% | -5% |
| Hybrid | 28% | 28% | 1% | -14% |
9. When you decide to use a transition manager, how do you
usually go about selecting a provider?
| 2015 | 2014 | 1-yr change |
4-yr change |
|
| We have one firm we always use | 24% | 21% | 12% | -3% |
| Pre-approved list of providers | 57% | 49% | 15% | 3% |
| Recommendation of our consultant | 12% | 19% | -35% | -23% |
| RFP/proposals from providers willing to bid | 17% | 25% | -33% | -2% |
10. What is your typical compensation arrangement with the
transition manager?
| 2015 | 2014 | 1-yr change |
4-yr change |
|
| Commission on agency trades | 67% | 65% | 3% | -12% |
| Flat fee | 13% | 15% | -11% | 29% |
| Principal trade | 4% | 6% | -39% | -61% |
| Percentage of assets | 8% | 8% | 3% | -21% |
| No explicit fee | 8% | 4% | 89% | -8% |
| Uncertain | 8% | 4% | 75% | 70% |
| Other | 4% | 4% | -3% | 18% |
11. Which benchmark(s) do you prefer to use to gauge
transition costs?
| 2015 | 2014 | 1-yr change |
4-yr change |
|
| Volume-weighted average price (VWAP) | 25% | 22% | 13% | -9% |
| Explicit costs | 34% | 37% | -9% | -28% |
| Implementation shortfall (T Standard) | 68% | 68% | 1% | 3% |
| Prior night’s close | 13% | 20% | -35% | -15% |
| Other | 3% | 5% | -24% | 166% |
12. Do you care if your transition manager derives undisclosed
benefits through any of the following means?
| 2015 | 2014 | 1-yr change |
4-yr change |
|
| Sales trading/indications of interest |
77% | 87% | -12% | 0% |
| Affiliated execution venues/ trading desks |
84% | 88% | -4% | 3% |
| Net trading | 79% | 89% | -11% | -4% |
| Internal crossing | 65% | 74% | -12% | 3% |
| Selling your order flow | 83% | 93% | -11% | 1% |
| Affiliated principal trading | 81% | 90% | -10% | 2% |
| Rebates from execution venues | 79% | 88% | -11% | -3% |
| Undisclosed riskless principal transactions |
77% | 86% | -10% | -3% |
| Revenue sharing agreements with unaffiliated brokers/execution venues |
88% | 90% | -3% | -5% |
13. How well do you understand the different transition
management models (i.e. sell side/buy side/agency/principal)?
| 2015 | 2014 | 1-yr change |
4-yr change |
|
| 5-Full understanding | 23% | 16% | 51% | 75% |
| 4-Good understanding | 43% | 41% | 3% | 52% |
| 3-Basic understanding | 30% | 30% | -2% | -21% |
| 2-Very little understanding | 3% | 9% | -72% | -80% |
| 1-No understanding | 2% | 3% | -55% | -80% |
| Average | 3.84 | 3.53 | 9% | 18% |
14. Do you trust the transition management industry as a whole?
| 2015 | 2014 | 1-yr change |
4-yr change |
|
| 5-Trust completely | 6% | 3% | 93% | 717% |
| 4-Mostly trust | 53% | 40% | 31% | 123% |
| 3-Neutral | 35% | 47% | -27% | -30% |
| 2-Little trust | 6% | 8% | -23% | -72% |
| 1-No trust | 1% | 2% | -38% | -80% |
| Average | 3.58 | 3.35 | 7% | 22% |
Methodology
From July 23 through August 24, Chief Investment Officer solicited asset owners worldwide to rate the performance of the transition managers they used in the 2014 calendar year. Additionally, transition managers were allowed to send unique survey questionnaire links directly to clients. Respondents in turn had the ability to rate up to 15 managers at once. By the survey’s close, a total of 385 responses were collected; 250 of these respondents indicated that they conducted at least one transition trade in 2014, and they provided a total of 284 ratings among 14 transition managers. All percentages in the survey charts are rounded to the nearest percent. Percentage change figures are calculated on the actual unrounded results.