Trend to Indexing, Longer-Duration Bonds Accelerates
SAN FRANCISCO and LONDON, June 17 /CNW/ - Mellon Transition Management
(MTM), the transition management specialist for BNY Mellon Asset Management,
is predicting that a record number of financial institutions such as pension
funds and endowments will replace their asset managers in the third and fourth
quarters of 2009.
The general trend over the last six months has been for institutions to
increase their exposure to indexing and longer-duration bond strategies,
according to Mark Keleher, chief executive officer of MTM. He added that they
are seeking to reduce risk, which appears to include scaling back on firms
actively managing assets. Institutions utilize transition managers such as MTM
to minimize their costs and risks when changing managers. They make these
changes if they are unhappy with the performance of an asset manager or if
they are changing their asset allocation strategies.
Keleher said he expects the number of transitions executed in the third
and fourth quarters of 2009 to reach record numbers. He based this prediction
on the more than 40 percent increase in the number of pre-trade inquiries
during the first five months of 2009 and the substantial jump in executed
transitions in the second quarter of 2009 versus the 2009 first quarter.
Pretrade inquiries have proven to be a good predictor of transition activity,
he said, often leading actual transition activity by several months. Pre-trade
inquiries are done by institutions to gauge the costs and risks of switching
"While the business has been increasing all year, institutions are
significantly accelerating the number of asset managers they are replacing,"
Keleher said. Before the latest spike in interest, Keleher said MTM had been
growing the assets that it transitions at a compounded rate of more than 40
percent annually over the last three years. "Our growth accelerated as a
result of the high volatility in the financial markets between late 2007 and
early 2009," said Keleher. "Market turbulence accelerated the rising dominance
of transition managers such as MTM that follow the fiduciary model."
The fiduciary model is the more transparent way of conducting
transitions, as the transition manager's clients are made aware of how the
transition manager is compensated, Keleher said. "The fiduciary model helps
protect clients from the often opaque pricing and conflicts of interest
inherent to the 'broker-dealer' model of transition management. Market share
gains by transition managers following the fiduciary model led to the exit of
a number of broker-dealer transition managers over the last 18 months."
Earlier this year, MTM expanded its London team by seven specialists,
which increased the global organization representing the business to 50
professionals. In May, it was named Transition Management Provider of the Year
at the International Custody & Fund Administration (ICFA) Global Awards 2009
and Best Transition Manager in the Scheme Services categories at the FT
Pension Investment Provider Awards 2009.
Mellon Transition Management also was named "2009 Transition Manager of
the Year" for the second successive year at the 2009 Global Pensions Awards.
Plan Sponsor has awarded MTM more "Best in Class" Awards than any other
provider in 2008.
Notes to Editors
The Bank of New York Mellon Corporation is a global financial services
company focused on helping clients manage and service their financial assets,
operating in 34 countries and serving more than 100 markets. The company is a
leading provider of financial services for institutions, corporations and
high-net-worth individuals, providing superior asset management and wealth
management, asset servicing, issuer services, clearing services and treasury
services through a worldwide client focused team. It has $19.5 trillion in
assets under custody and administration, $881 billion in assets under
management, services more than $11 trillion in outstanding debt and processes
global payments averaging $1.8 trillion per day. Additional information is
available at www.bnymellon.com.
Mellon Transition Management is a division of The Bank of New York
Mellon. Outside of the U.S. MTM is represented in the U.K. by BNY Mellon Asset
Management International Limited and in Australia through BNY Mellon Asset
Management Australia Limited. This press release is issued by The Bank of New
York Mellon to members of the financial press and media. All information and
figures source The Bank of New York Mellon as at 31 March 2009 unless
otherwise stated. This press release is for information purposes only. It does
not constitute an offer or solicitation of securities or investment services
or an endorsement thereof in any jurisdiction or in any circumstance in which
such offer or solicitation is unlawful or not authorised. The Bank of New York
Mellon, London Branch, registered in England and Wales with FC005522 and
BR000818. Branch office: One Canada Square, London E14 5AL
Authorised and regulated in the UK by the Financial Services Authority.
A Bank of New York Mellon Company(SM)
For further information:
For further information: Mike Dunn, (212) 922-7859,
firstname.lastname@example.org; Sara Deutscher, +44 20 7163 2744,