About transition management |
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What is transition management?
A transition involves trading out of an initial portfolio into specific target portfolios. Transition management is a specialist service that focuses on minimising costs and managing risks for a Fund during the transition. The RisCura Transition managers ensure Fund values are protected during a transition through the use of:
- A systematic, risk-controlled transition process;
- Best-of-breed brokers to source liquidity;
- Strategies to minimise the cost and risks of the transition.
When should a Fund use a transition manager?
Why use a transition manager?
- Explicit transition costs (such as taxes, brokerage) are easy to quantify. However, indirect costs (market impact, bid-ask spread differences, liquidity and opportunity costs) can comprise 75-90% of the total transition cost.
- Ineffective communication and poor co-ordination of a transition can result in unexpected cost escalation. In addition, if multiple brokers enter the market on behalf of multiple managers, the effect on the market/share prices is far greater than if one controlled entry point is used.
- Transition managers alleviate these risks and prevent situations where managers trade between each other in the market, when a simple transfer of scrip/assets between managers could be done.
- A disciplined, integrated process managed by an independent party who can oversee multiple parties and has experience in trading across multiple markets, will help reduce unnecessary costs and make sure a Fund is not exposed to undue risks.
