Demand for transition managers grows

Doubts about equities and market-timing scandals have been bad news for the fund management industry. But they have been a boon to the transition managers who help shift assets from one fund or product to another. They are in increasingly short supply.

One headhunter said: 'Everyone is trying to poach from one another. There is a real need for credible transition management experience.'

The market has been dominated by fund managers such as BGI, Merrill Lynch Investment Managers and State Street Global Advisors, which offer transition management assistance to other funds. But in the past 18 months broker dealers and custody banks have been moving in.

JP Morgan, Deutsche Bank, Northern Trust and Mellon Global Investments all made senior appointments for new transition management teams last year. In the process, existing operations have lost staff. For example, Julia Dickson left BGI for Mellon in December. Kevin Hardy left State Street in November to become European director of transition management at Northern Trust.

Mark Davis, an investment consultant at Watson Wyatt who advises fund management companies choosing a transition manager, said more new entrants are likely: 'I get regular phone calls from brokerage firms and custody banks who are thinking of establishing transition management products. Some of those will enter market in 2004.'

At Northern Trust, Hardy said his team of four people might expand this year: 'Transition management is an area that is growing fast. We will hire more people as the business grows.'

New staff may prove difficult to find. A headhunter working in the area said: 'It's a very small market. There are two or three people at every house who are very good and everyone's after them.'

However, it may be possible to draw on other areas. Although transition management services have traditionally been offered by fund management firms, they are more akin to sales and trading than long term investing. Goldman Sachs, for example, places its transition management group in its trading and capital markets division.

As a result headhunters are looking for transition managers on the trading floor and in the back office. Davis said transition management skills include broadly based trading experience, as well as exemplary project management abilities to cope with the simultaneous transactions involved in portfolio reallocation.

Portfolio traders are the prime target. Mark Horlock, a recruitment consultant at Alexander Mann, said they have the right knowledge of different asset classes, as well as an understanding of market timing.

Patrick Morrissey at the search firm Sheffield Haworth, is also on the look out for portfolio traders. With the exception of balanced portfolio managers with experience of a wide range of products, most fund managers are unsuited to transition management, said Morrissey. 'You need an understanding of everything from equities and fixed income to foreign exchange and real estate,' he said.

Samantha Donald, a recruitment consultant at Shepherd Little, is looking for staff to fill back office transition management roles in transition co-ordination. She said: 'There's a need for people with strong project and client management skills and good operational understanding.'

Yet it is existing staff who are most likely to benefit from growth in the sector. Davis said: 'One of the key things we tell clients to look for is experience. Good quality people in this market are a valuable commodity.'

Pay reflects that. Although Donald said junior co-ordination roles in London start at anything from 30,000 to 60,000, Morrissey said heads of transition management are on seven-figure dollar packages. 'This is a high margin specialist business. A few people are making lots of money for their organisations and themselves.'