Transition management

Last updated

Transition management, in the financial sense, is a service usually offered by sell side institutions to help buy side firms transition a portfolio of securities. Various events including acquisitions and management changes can cause the need for a portfolio to be transitioned. A typical example would be a mutual fund that has decided to merge two funds into one larger fund. In doing this, large quantities of securities will need to be bought and sold. Another frequent occurrence is a firm wanting to liquidate a large portfolio. The process of doing this can be very expensive. The costs include commissions, market impact, bid–offer spreads, and opportunity costs.

A firm seeking to transition a portfolio will often look for an outside firm to perform the transition. Transition managers are generally able to transition the portfolio at a lower cost than a firm could achieve internally. Companies offering transition management can also add value by helping plan the transition, managing risk during the transition, and generating reports after the transition. Such companies are often referred to as transition companies. [1]

Transition managers have a number of methods to help transition a portfolio. Usually they are directly connected to multiple markets or liquidity centers. Since they may be transitioning several different portfolios they can cross orders, reducing commission and exchange fees. Additionally, they may have specialist traders who handle illiquid securities.

A fiduciary-friendly recent trend has been to remove all conflicts of interest associated with transition management by "unbundling" advice from execution through the use of a transition or brokerage consultant. In this way, the adviser's sole possible interest is improving performance and lowering execution costs, rather than having a trader and adviser under the same roof.

While some brokers still try to sell transition management as a separate product, it is commonly offered on sell side desks as a part of regular trading services. These firms can often provide the same service for less in part due to modern trading algorithms and systems reporting.

In business

In the business and corporate sense, Transition Management is a method used by Senior Executives to access a full range of project and programme management services from conception to delivery. It is provided by elite industry Portfolio Executives and managed by a Project Director to fulfil and deliver critical business objectives.

It is utilised as an alternative to the traditional consultancy model and brings together three key aspects: Consulting - Project Management - Outcomes/Delivery.

This method of operating has been pioneered by John McLaughlin of COGENT Executive. [2] [ non-primary source needed ]

Related Research Articles

<span class="mw-page-title-main">Sales</span> Activities related to the exchange of goods

Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale. A period during which goods are sold for a reduced price may also be referred to as a "sale".

<span class="mw-page-title-main">Investment banking</span> Type of financial services company

Investment banking pertains to certain activities of a financial services company or a corporate division that engages in providing advisory-based services on financial transactions for clients, such as institutional investors, corporations, and governments. Traditionally associated with corporate finance, such a bank might assist in raising financial capital by underwriting or acting as the client's agent in the issuance of debt or equity securities. An investment bank may also assist companies involved in mergers and acquisitions (M&A) and provide ancillary services such as market making, trading of derivatives and equity securities, FICC services or research. Most investment banks maintain prime brokerage and asset management departments in conjunction with their investment research businesses. As an industry, it is broken up into the Bulge Bracket, Middle Market, and boutique market.

<span class="mw-page-title-main">Day trading</span> Buying and selling financial instruments within the same trading day

Day trading is a form of speculation in securities in which a trader buys and sells a financial instrument within the same trading day, so that all positions are closed before the market closes for the trading day to avoid unmanageable risks and negative price gaps between one day's close and the next day's price at the open. Traders who trade in this capacity are generally classified as speculators. Day trading contrasts with the long-term trades underlying buy-and-hold and value investing strategies. Day trading may require fast trade execution, sometimes as fast as milli-seconds in scalping, therefore direct-access day trading software is often needed.

Management consulting is the practice of providing consulting services to organizations to improve their performance or in any way to assist in achieving organizational objectives. Organizations may draw upon the services of management consultants for a number of reasons, including gaining external advice and accessing consultants' specialized expertise regarding concerns that call for additional oversight.

<span class="mw-page-title-main">Valuation (finance)</span> Process of estimating what something is worth, used in the finance industry

In finance, valuation is the process of determining the value of a (potential) investment, asset, or security. Generally, there are three approaches taken, namely discounted cashflow valuation, relative valuation, and contingent claim valuation.

In financial services, a broker-dealer is a natural person, company or other organization that engages in the business of trading securities for its own account or on behalf of its customers. Broker-dealers are at the heart of the securities and derivatives trading process.

A financial analyst is a professional, undertaking financial analysis for external or internal clients as a core feature of the job. The role may specifically be titled securities analyst, research analyst, equity analyst, investment analyst, or ratings analyst. The job title is a broad one: in banking, and industry more generally, various other analyst-roles cover financial management and (credit) risk management, as opposed to focusing on investments and valuation; these are also discussed in this article.

An electronic communication network (ECN) is a type of computerized forum or network that facilitates the trading of financial products outside traditional stock exchanges. An ECN is generally an electronic system that widely disseminates orders entered by market makers to third parties and permits the orders to be executed against in whole or in part. The primary products that are traded on ECNs are stocks and currencies. ECNs are generally passive computer-driven networks that internally match limit orders and charge a very small per share transaction fee.

Financial risk management is the practice of protecting economic value in a firm by managing exposure to financial risk - principally operational risk, credit risk and market risk, with more specific variants as listed aside. As for risk management more generally, financial risk management requires identifying the sources of risk, measuring these, and crafting plans to mitigate them. See Finance § Risk management for an overview.

Construction management (CM) aims to control the quality of a project's scope, time, and cost to maximize the project owner's satisfaction. It uses project management techniques and software to oversee the planning, design, construction and closeout of a construction project safely, on time, on budget and within specifications.

Algorithmic trading is a method of executing orders using automated pre-programmed trading instructions accounting for variables such as time, price, and volume. This type of trading attempts to leverage the speed and computational resources of computers relative to human traders. In the twenty-first century, algorithmic trading has been gaining traction with both retail and institutional traders. A study in 2019 showed that around 92% of trading in the Forex market was performed by trading algorithms rather than humans.

<span class="mw-page-title-main">Market data</span> Electronic financial trading price and related data

In finance, market data is price and other related data for a financial instrument reported by a trading venue such as a stock exchange. Market data allows traders and investors to know the latest price and see historical trends for instruments such as equities, fixed-income products, derivatives, and currencies.

<span class="mw-page-title-main">Financial adviser</span> Professional who renders financial services to clients

A financial adviser or financial advisor is a professional who provides financial services to clients based on their financial situation. In many countries, financial advisors must complete specific training and be registered with a regulatory body in order to provide advice.

<span class="mw-page-title-main">Pricing strategies</span> Approach to selling a product or service

A business can use a variety of pricing strategies when selling a product or service. To determine the most effective pricing strategy for a company, senior executives need to first identify the company's pricing position, pricing segment, pricing capability and their competitive pricing reaction strategy. Pricing strategies and tactics vary from company to company, and also differ across countries, cultures, industries and over time, with the maturing of industries and markets and changes in wider economic conditions.

Scalping, when used in reference to trading in securities, commodities and foreign exchange, may refer to either

  1. a legitimate method of arbitrage of small price gaps created by the bid–ask spread, or
  2. a fraudulent form of market manipulation.

An order management system, or OMS, is a computer software system used in a number of industries for order entry and processing.

Direct market access (DMA) is a term used in financial markets to describe electronic trading facilities that give investors wishing to trade in financial instruments a way to interact with the order book of an exchange. Normally, trading on the order book is restricted to broker-dealers and market making firms that are members of the exchange. Using DMA, investment companies and other private traders use the information technology infrastructure of sell side firms such as investment banks and the market access that those firms possess, but control the way a trading transaction is managed themselves rather than passing the order over to the broker's own in-house traders for execution. Today, DMA is often combined with algorithmic trading giving access to many different trading strategies. Certain forms of DMA, most notably "sponsored access", have raised substantial regulatory concerns because of the possibility of a malfunction by an investor to cause widespread market disruption.

Enterprise release management (ERM) is a multi-disciplinary IT governance framework for managing software delivery and software change across multiple departments in a large organization. ERM builds upon release management and combines it with other aspects of IT management including Business-IT alignment, IT service management, IT Governance, and Configuration management. ERM places considerable emphasis on project management and IT portfolio management supporting the orchestration of people, process, and technology across multiple departments and application development teams to deliver large, highly integrated software changes within the context of an IT portfolio.

Robo-advisors or robo-advisers are a class of financial adviser that provide financial advice and investment management online with moderate to minimal human intervention. They provide digital financial advice based on mathematical rules or algorithms. These algorithms are designed by financial advisors, investment managers and data scientists, and coded in software by programmers. These algorithms are executed by software and do not require a human advisor to impart financial advice to a client. The software utilizes its algorithms to automatically allocate, manage and optimize clients' assets for either short-run or long-run investment. Robo-advisors are categorized based on the extent of personalization, discretion, involvement, and human interaction.

Peer-to-peer asset management is the practice of sharing investment strategies between unrelated individuals, or "peers", without going through a traditional financial intermediary such as a bank or other collective investment management vehicle.

References

  1. BAERT, RICK (March 31, 2014). "Transition management keeps shrinking". ensions and Investments. Retrieved September 16, 2014.
  2. "About - Cogent Executive" . Retrieved October 30, 2022. Born out of the need to combine the strategic and advisory consultancy model with the business needs of actual delivery, Transition Management as a sector was created by our Founder & CEO John McLaughlin.