A Practitioner's Guide to Establishing a Prudent Transition Process

摘要

The hallmark of a successful transition is often defined by the ability of asset owners to manage all of their risks - operational, fiduciary, performance, as well as execution.This challenge is exacerbated by the fact that, while transition management firms offer a variety of execution strategies, the lines between their business models are blurring.rnAs fiduciaries, asset owners are not, of course, expected to have a crystal ball. Rather, the metric by which their decisions are evaluated should be the prudence of their process. It is therefore essential that asset owners have a thorough understanding of all facets of their transition portfolios. Such knowledge is a prerequisite to establishing optimal transition strategies and providing comfort that appropriate safeguards are in place to maximize client confidentiality and minimize conflicts of interest. In practice, this calls for a blend of strategic and tactical considerations that balance theoretical "best practices" against practical necessity.rnThis article provides a summary of specific issues asset owners should review when trying to construct prudent transition strategies, and critical questions asset owners should ask prior to hiring their transition managers. It also identifies conflicts of interest, revenue generation, fiduciary responsibility, pre-hedging, cost estimation, pre-transition planning, trade implementation, and post-transition evaluation as essential issues asset owners should consider when faced with the need to transition assets within their funds. It further identifies key due-diligence action items for asset owners, and offers a roadmap to asset owners regarding transition management best practices and uniform protocols.