Transition Management: When Fund Managers Are Changed

At certain times during the lifespan of a fund, the manager will be changed.  This may happen due to poor performance, the manager leaving for another fund, two funds merging or the fund is being liquidated.  The new manager will want to re-structure the portfolio of the former manager.  Other funds will be watching this and may have the ability to negatively affect the performance of the fund by selling its current assets or by buying the assets that the new manager likes.  During this period, the fund may hire the Transition Management team of a sellside bank to preserve the value of the portfolio until the new assets are in place.  The team is given a target portfolio from the new manager.  The positions being changed are sold off by the transition manager.  The goal is to minimize market impact and execution costs for the incoming manager.  If there is a long interim period between managers, then the transition manager will be tasked to keep the fund's performance in-line with the market.  Of the large investment banks, Credit Suisse was rated the top transition manager in June 2010 by Global Investor Magazine.