Study: Institutional Investors Suffer Delay in Changing Managers, Asset Allocation

(June 1, 2011) — Research by Mellon Transition Management (MTM) — the transition management specialist for BNY Mellon Asset Management — shows that institutional investors are taking longer to change investment managers or asset allocation than they did before the 2008 financial crisis.

“Transition management has evolved significantly since we opened our doors 10 years ago,” Mark Keleher, MTM co-founder and chief executive officer, said in a statement. “While this service originated as a low-cost way to change asset allocations or investment managers, the focus is now much more on risk control. Increasingly, transition assignments involve multiple asset classes, illiquid securities, global markets and derivative overlays.”

According to the study, since the financial crisis began in 2008, institutions have taken up to a year to complete the transitioning of their assets away from one investment manager to another after beginning their initial consultations with MTM. In comparison, before the start of the crisis, the transitioning of assets away from one investment manager to another typically took two to four weeks. The reason for the delay: greater compliance scrutiny within the institutional investment environment as plan sponsors and investment managers deal with regulatory changes and governance challenges. Keleher asserted that transition management trends that started following the financial crisis continue today, with institutions continuing to move money away from home country equities to corporate bonds and international equities.

To see aiCIO Magazine’s Spring 2011 article on transition management’s allocation trends, click here.