GLOBAL - Transition managers are being pushed into the role of asset managers as investors dissatisfied with their active managers increasingly choose to park their funds with the service providers.
after dumping poorly performing active managers.
Andrew Williams, a senior associate and senior consultant with Mercer Sentinel, said the practice had been around for a few years, but was
becoming more common as trustees became more confident in specialised investments.
However, with holding periods getting longer, the issue of measuring performance was a concern.
Williams said: "After the initial move to the interim structure, then the pension fund would be effectively in an asset management arrangement, with ongoing benchmarks."
There can also be potential for conflict of interest, especially in cases where transition management is offered by a firm which also has an asset management arm.
Struan Malcom, head of delivery and sales with RBS transition management (formerly ABM Amro's transition management arm), said: "There is scope for a
conflict of interest, especially with pooled funds where asset illiquidity can be an issue.
"In theory, a transition could be used to clean out some assets a manager has had problems selling. Where a client transitions into or out of a pooled
fund, what's important is [that] it's pro-rated or in their interests."
He added though, that reputable transition managers would ensure the necessary safeguards.
Williams noted: "The potential [for conflicts of interest] doesn't necessarily rule out this approach, a client just has to be confident their transition manager is up to the task."
Kim Gubler says it is time that schemes and administrators reassess SLAs and look at what real people need from their pension schemes and when
The Pensions Regulator (TPR) is focusing on reducing the number of "poorly-run" schemes as it seeks to improve standards across the board.
Prudential Retirement has completed around $2.6bn (£2bn) of reinsurance contracts for UK pension scheme longevity risk since the start of the year, it has disclosed.
Funding standards for DB schemes have increased exponentially over the past decades. Con Keating says such significant overstatement of liabilities will lead to pushback through the courts.