UK - Transition managers who fail to sign the UK's impending T-Charter could find themselves excluded from consultant short lists and shunned by pension funds altogether, the industry has warned.
The T-Charter, still in draft form, is a set of 10 principles designed to protect institutional clients from “poor or questionable” practices within the transition management industry.
“If 70% plus [managers] sign it, I’d be surprised if any adviser recommended using any transition manager that didn’t sign it,” said Andy Cheseldine (pictured), consultant at Hewitt Associates. Another stakeholder would be the professional indemnity providers, he added.
“Advisers in general can’t do business unless we’ve got professional indemnity insurance, and a professional indemnity insurer, when they look at our processes, could say ‘how do you come to your shortlist of investment manager or transition manager?’,” he said. “If we say ‘oh, we are quite happy to ignore the T-Charter’, then there is a danger that either our premium’s going to go up or we won’t get cover.”
Graham Dixon, managing director and head of European transition management at Credit Suisse, added: “If a significant number of managers decide the T-Charter is important and want to join, consultants will be faced with managers who are T-Charter compliant and managers who are not. It will put the onus on the those outside the charter to say what is in the charter that they are unwilling to comply with.”
Lachlan French, head of transition management at State Street Bank Europe said shunning the charter could damage business prospects. “[The T-Charter] gives the tools to the trustees, the consultants and the client to understand what the provider is going to do for them and thus provides a level playing field based on a high standard of transparency and disclosure,” he said. “If people... are not happy complying with the charter, then I would expect that to be detrimental to the growth of their business.”
At the time of going to press, key members were due to meet on 31 May.
Dixon said the final issues being ironed out centred on clarification of the respon-sibilities of agent and principal and additional drafting on pre-hedging. Following the meeting, the next phase would be to hand the draft to an external legal firm that could put together a “non-repetitive, unambiguous and robust” document that would go out to all transition managers to be considered by their compliance and legal departments.
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