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Business and operational management insights for
multi-manager investors, clients and service providers
Newsletter 1
Welcome to Financial Viewpoint's first newsletter! Over the past two years, transitioning of funds and businesses, and then ultimately their assets has been a major focus, and thus the topic of our first newsletter. More specifically, the newsletter looks at transition managers and their evolution to being a permanent member of the multi-manager team. This evolution, and the rapidly changing financial landscape have many implications for multi-manager investors and their clients.
I hope you enjoy our first newsletter, and we look forward to your feedback.
Best regards
Brett Elvish
Financial Viewpoint
04 1317 6164
brett@financialviewpoint.com.au
Transition managers in transition
I attended a Melbourne Business School program titled "Winning the War on Talent" presented by Associate Professor Ian Williamson. We discussed the challenges of retaining and replacing talented professionals, an issue that should always be at the forefront of our minds in the investment industry, even in the current market environment.
Professor Williamson opened the session with a question:
Can your head of human resources name the external short list of candidates to replace the CEO, each of the senior managers reporting to the CEO and other key staff.
Given the difficulty in retaining talent, this was presented as a mission critical activity, yet from the show of hands (or lack thereof), it clearly isn't happening to any great extent. This was a simple statement with tremendous practical application, which could convert HR from an administrative backwater to a strategically important activity.
So what does this have to do with multi-manager investing, and transition management more particularly?
Even the best long term investment strategy requires continual adaption to cope with market volatility, the never ending people changes, switching of investment options, new investment opportunities and cashflows. Transition managers are being regularly called upon to help address these issues and to implement investment manager changes, commonly as a direct outcome of the "war for talent".
Multi-managers should have in place a formal transition manager panel, with each transition manager contractually ready to act immediately. Just like our dream HR manager, the multi-manager needs to be able to immediately identify and engage alternative transition managers.
Why is a transition manager panel important?
- Each transition manager has a different business model, motivation for providing its services and capability set. As such, the "right" transition manager will vary depending upon your particular transition needs.
- Often the need for a transition manager is not anticipated (e.g. team walk-out) and requires quick action. There is no time to undertake due diligence or negotiate new contracts. The transition manager needs to be ready to go.
- The concept of counterparty risk had all but been forgotten during the bull market, but with the evaporation of trust in the market, it has re-emerged as one of the most significant risks faced by investors. Depending on the size and nature of transition activity, more than one transition manager may be prudent.
- As an extension of counterparty risk, recent market events have reminded us that a service provider here today may not be here tomorrow, and in business critical roles, immediate replacements are essential.
What is a transition manager panel?
A transition manager panel is a small number of transition managers that have been formally reviewed and contractually engaged to provide transition management services.
Despite the importance of their role and the level of exposure that a fund may have to the transition manager during a transition, they generally have not been subjected to the same rigorous scrutiny as their investment manager counterparts. This is reflective of their evolution to being a key service provider for multi-managers. However, ignoring semantics, they are an investment manager, albeit a temporary one.
Transition managers need to be subjected to the same level of rigour as investment managers, and given that in some instances they may also be acting as principal in transactions, greater rigour is arguably necessary.
The transition manager clearly plays a material role in today's multi-manager portfolio, and therefore should be subject to "appropriate due diligence, approval and ongoing monitoring", as per APRA's Superannuation Guidance NoteSGN 130.1 Outsourcing.
Even the best long term investment strategy requires continual adaption to cope with market volatility, the never ending people changes, switching of investment options, new investment opportunities and cashflows. Transition managers are being regularly called upon to help address these issues and to implement investment manager changes, commonly as a direct outcome of the "war for talent".
Summary Viewpoint
Financial Viewpoint
Financial Viewpoint provides business and operational management advice, research and tools supporting multi-manager investors, clients and service providers, including:
- Strategy and governance advice for funds and businesses, including reviews and opportunity identification
- Advice on management of custodians, transition managers, asset consultants and investment managers
- Tools, systems and research for better management of businesses and funds
Financial Viewpoint quick links...
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Example projects include:
- Working with board and investment committees on investment beliefs, investment governance, investment models, investment policies, service provider appointments, competitive positioning, delegations and peer risks
- Working with CEOs, CIOs and COOs on strategy, successor fund transfers, operating models, organisational design, as well as staff mentoring and training
- Working with teams on investment and operational due diligence (internal and external), service provider management, project implementations, conflict identification and management, and team development
- Reviews and advice relating to investment consultants, implemented consultants and custodians, along with related due diligence both domestically and internationally
- Negotiation of arrangements with outsourced service providers including fees, service standards and agreements
- Specialist work assisting investors reduce foreign exchange costs working closely with FX Transparency
Investment consulting reviews
Investment manager capability reviews
Investment managers
(Australian & international shares, bonds, property)
- Target market
- Product design
- Pitch material
- Mock reviews
- Operational due diligence
- Investment consulting market
- After tax returns
- Fees, including performance fees
Negotiation strategy & implementation
(fees, service standards, commercial terms, litigation)
- Retail platform
- Commercial multi-manager
- Industry funds
- Public sector funds
- Corporate funds
- Retail fund
- Covering:
- Custodians
- Investment managers
- Administrators
- Investment consultants
Strategy off-site facilitation
- Strategic review of investment positioning
- Alignment of investment strategy and business (fund) strategy
- Alignment of internal resources and expertise with areas of greatest impact
- Alignment of external resources with investment strategy
- Internal capability self assessment
- Peer risk sensitivity analysis
Investment administration (custody) reviews
Operational due diligence reviews
- Multi-managers
- In-house investment managers
- External investment managers
Industry superannuation fund
Strategic and operational advice to guide the establishment of common infrastructure to support multiple funds, tax structures & investment options:
- Current operation, competitive landscape and regulatory environment
- Strategic positioning
- Investment governance
- Member entitlements
- Operating models
- Custodian review and selection process
- Asset consultant selection process
- Unit pricing and taxation
- Operational transition
Multi-manager and private equity fund
Strategic and operational advice:
- Business model
- Target market
- Product design
- Investment administration providers
- Investment systems and infrastructure
- Operational due diligence framework
- Investment manager due diligence
- After tax returns
- Transition manager panel
Investment platform provider
Implementation efficiency review for an investment platform provider
- Business model and governance
- Investment menu
- Investment manager relationship management
- Operational implementation models
- Fee and service re-negotiation
- Product changes
- Operational changes
Industry superannuation fund
Project managed the asset transition for a $200 million defined benefit to defined contribution conversion
- Strategy determination
- Detailed implementation planning
- Implementation
- Post implementation review
Specialist debt investment manager
Strategic and operational advice:
- Business concept
- Business model
- Financial modelling
- Equity raising
- Product design
- Fund raising
- Target market
Multi-manager
Project manage a $1.5 billion asset transition for a multi-manager and retail investment platform
- Appointment and termination of over 50 investment managers
- Trading across multiple markets and asset classes
- Implementation of new investment strategies
- Launch of new investment trusts
New market entrant
Strategic advice for an international company considering acquisitions
- Australian superannuation industry
- Member administration
- Key issues and trends
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