Transition Management – Services

Analyse tasks, plan strategies, evaluate performance

An unsupervised transition from an initial portfolio (A) to a target portfolio (B) carries incalculable risks and costs. Only structured and comprehensive support during the entire transition can guarantee transparency, cost mitigation and ultimately performance throughout the course of transactions involved.

Universal-Investment's modular concepts are designed to meet the specifics and complexity of requirements of each transition (the number of asset classes, investment instruments and currencies involved, the liquidity, trading specifics, regulatory requirements). If necessary, we select and work with specialised transition managers externally. Whatever the case, Universal-Investment's experts are on hand from the start of the transition to the finish.

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Source: Portfolio Management Universal-Investment-Luxembourg S.A., Branch Frankfurt am Main

At the Core of the Analysis: Costs and Risks

The explicit costs of a transaction can be determined: broker and management fees, taxes and stock exchange fees accrued during the transition. Implied costs are far more difficult to estimate. These include bid-ask spreads or market impact costs which arise in particular when executing transactions in less liquid markets. A pre-trade analysis should identify these cost drivers and their magnitude. The costs drivers and their respective characteristics must be determined and put in relation to the performance risk in the form of opportunity costs.

The reason for this is that the longer it takes to gain market exposure for a target portfolio (B), the higher the opportunity costs might be. Execution strategies therefore strive for a mixed optimum based on both factors in order to achieve an optimal transition.

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Source: Portfolio Management Universal-Investment-Luxembourg S.A., Branch Frankfurt am Main

Selection of Managers, Execution and Trading Strategy

Universal-Investment compiles a consolidated pre-trade analysis for investors and provides specialised transition managers to match investors’ individual needs, as well as a choice of service partners required for the project. Investors decide on an execution and trading strategy that has been developed simultaneously. Universal-Investment subsequently steers and oversees the execution.

Success can be Measured: the Transition Performance

The calculation of the so-called implementation shortfall is a vital part of the pre- and post-trade analyses and performance review. This tried-and-tested model can be used to determine the actual costs (explicit and implied) of the transition.

A hypothetical target portfolio (priced at the closing of the evening prior to the transaction, excluding costs) is compared with the actual portfolio implemented during the transition.

Vergrößern
Source: Portfolio Management Universal-Investment-Luxembourg S.A., Branch Frankfurt am Main

Involve Transition Managers Early On

As an investor you can make a substantial contribution to the success of any major portfolio restructuring by involving a transition manager early on. Only by doing so can you minimise risk as far as possible and maximise efficiencies. Let’s talk. We look forward to sharing our ideas with you.