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BNY Mellon to Exit Transition Management Business

Four major players have abandoned the industry in under a year.
Reported by Featured Author

(March 11, 2014) – BNY Mellon is in the process of shutting down its global transition management operations, aiCIO can reveal.

The company expects to have ceased all activity in the area “within the next couple of months,” according to Tim Steele, global head of media relations.

The decision reveals a strategic about-face for BNY Mellon, which boasted of its contrarian stance on the industry as recently as last summer. 

"We're seeing growing demand for transition management services from insurance companies and other financial intermediary complexes that manage 40 Act funds," said Mark Keleher, CEO of BNY Mellon beta and transition management, in June 2013. "These complexes are increasingly recognizing the potential benefits of new ways to minimize transaction costs and manage the investment and operational risks associated with overseeing such programs."

Keleher argued that with the exit of many broker-dealer-based transition managers from the business, demand was rising for transition managers that were registered investment advisors.

Keleher has led the division since 2000. Roughly 35 full-time staff globally “will be impacted” by its closure, according to Steele, although it is unclear whether those impacts include layoffs, and if Keleher would be involved.

BNY Mellon follows three other prominent service providers who have exited major portions of the market within the last 10 months. 

Credit Suisse quietly stopped bidding on American transitions in May 2013. Later that month, JP Morgan confirmed that it too was “winding down its transition management business.”

Shortly thereafter, ConvergEx, the beleaguered brokerage and trading house, abandoned the sector in Europe, the Middle East, Africa, Asia, and Pacific regions. The firm agreed to pay $150 million in fines to the US Securities and Exchange Commission and Department of Justice last December for overcharging clients during transitions and other brokerage transactions.  

Both ConvergEx and BNY Mellon downsized their transition management teams before terminating branches of the business, according to aiCIO’s 2013 client survey and buyer’s guide.

The survey responses suggest that despite CEO Keleher’s public bullishness, by 2012 BNY Mellon was struggling to serve its clients. Eight firms garnered enough reviews to qualify for the league table, and BNY Mellon placed eighth by a wide margin.   —Elizabeth Pfeuti & Leanna Orr