Our Services Transition and trading solutions
 

Transition and trading solutions

Our core belief is that the best solutions stem from an honest, unconflicted and customised approach to providing advice, oversight and analysis. In so doing, we seek to help our clients make better investment decisions consistent with their fiduciary responsibilities.

Our Trading solutions business supports independent assessment and selection of outsourced buyside trading. Recent evolution of markets has impacted trading across both the buy and sell-side, resulting in regulatory and cost constraints. These constraints have resulted in a greater desire to outsource certain asset management functions, including trading.

Our Transitions team is led by Steve Webster, a seasoned transition management professional with over 20 years’ experience at the ‘coal face’. Steve Webster was featured in The Global Investor Transition Management Guide 2020/21.

Track Record – MJ Hudson advised on transitions worth over GBP 50 billion in 2019

Independent – MJ Hudson has no affiliation to the management of assets or investment product

Regulated – MJ Hudson provides regulated advice about the strategy and management of change

Expert – MJ Hudson is the only regulated transition adviser, which has “experienced” transition professionals

Analysis and Selection – MJ Hudson uses an in-depth survey and review of transition provider when assessing manager selection

Accredited – MJ Hudson is one of three “transition advisers” appointed to the UK National LGPS Framework (MJH / Hymans / Mercer)

We have a long standing relationship with MJ Hudson who have provided excellent investment support and advice as well as strong reassurance, rigour and challenge relating to our investment portfolio.
Rob Wilson, Worcestershire Pension Fund
Who we work with
What we do
Transition management advisory and oversight

Making a difference to transition outcomes.

Being actively involved in the transition delivery makes the difference between passively reporting on a result and actively influencing the outcome. Our oversight and monitoring consists of:

  • Tracking deliverables – utilising our Event Tracker we assess the ongoing deliverables and compare this to the Transition Manager’s project plan (“Run Book”). This include monitoring operational, execution and risk outcomes;
  • Compliance and controls – the progress of the transition is also monitored for potential compliance and control breaches. This may include failures to disclose affiliated earning or benefits or indeed failure to disclosure errors. Monitoring assists timely resolution, impacting the outcome of the transition; and
  • Communication and alerts – monitoring and oversight of any deliverable has limited benefit, unless the signals relating to omissions and or delays can be properly interpreted. Using experience and understanding of transition events allows effective priority and escalation of issues as they happen.
Transition management and transaction cost advice

Our transition management and transaction cost advisory service provides you with the tools and resources to ensure that transition events are executed smoothly and the explicit and implicit costs of all portfolio changes are minimised. Our core belief is that the best outcomes stem from an honest, unconflicted and customised approach to providing advice. In so doing, we seek to help our clients make better investment decisions consistent with their fiduciary responsibilities.

Our services include:

  • Transition Manager selection
  • transition management advisory and oversight
  • transition management cost analysis and reporting
  • transaction costs analysis

The advantages of working with MJ Hudson:

  • team led by a seasoned transition management professional with over 16 years’ experience at the ‘coal face’;
  • analytics provided by a leading global provider, whom has granted UK access to its service exclusively via MJ Hudson;
  • qualitative assessment of transition events – pre, during and post. Identifying the right transition provider, monitoring their progress against targets and analysing their performance requires experience that asset owners rarely have access to;
  • independent qualitative advice and quantitative analysis, bespoke to each client’s specific needs;
  • as MJ Hudson is purely an advisory firm, there is no conflict for asset managers in providing the detailed confidential data that is essential to conducting a full cost analysis (particularly implicit costs);
  • a flexible alternative to an internal fixed cost capability;
  • MJ Hudson can analyse transition management events ex-post and if identified, seek remediation on behalf of our clients;
  • all written advice must go through our governance process and is subjected to a peer and compliance review;
  • our Senior Advisers are all registered with the FCA and are “Approved Persons” (CF30); and
  • our advice is covered by our umbrella Professional Indemnity Insurance.

For more information on our transition management advisory services, please view and download our flyer via this link.

Transition management planning and strategy

Deciding on when and how to transition shouldn’t be left to chance.

The road to transition is often long and can start many months, even years, before changes are executed. We believe that clock starts, once a decision to change has been taken. This is simply because, the period after decisions are made is an opportunity cost. So planning and strategy should consider:

Investment selection – Understanding the transition/trading constraints of a new investment should be a consideration in manager due diligence. Analysis of liquidity, structural and legal constraints and penalties can highlight significant differences in implementation expense.

Event shortfall – as mentioned, delays in agreed investment change are risks which need to be measured. Event shortfall simply keeps count of the difference between the unwanted and new investments from the point of agreed change. If nothing else, this ensures the “tail” of operations isn’t “wagging” the head of investment returns.

Trigger points – deciding on when to make a change often leads to healthy debate. There is little doubt though that timing can be everything and designing a strategy which makes a change at an optimal point, can reap long term benefits. Trigger point monitoring, ensures that all the preparation is set and as the name suggest, starts implementation at a change at pre-agreed price / liability triggers.

Cost analytics – pre-trade analysis estimates the costs of buying and selling assets and the risks incurred over the time it takes. Sadly, this is often completed at the 11th hour (or just before a transition starts). Analysis at the planning stage identifies key constraints, including transferability, liquidity, tax etc., which can significantly influence what you do but also who does it for you.

Transition manager selection

Deciding on when and how to transition shouldn’t be left to chance.

All transition managers are not born equal. Given the small number of providers available, you might be forgiven for thinking that the services they provide are broadly uniform. This couldn’t be further from the truth. Our survey of transition managers in 2017 (refreshed in 2020), showed differing skills, experience, coverage and even conflicts. In picking a transition manager we typically review:

Panel review / selection

For most institutional investors, forming a panel of providers allows quick an easy selection, without the need for formal procurement. Whilst panel’s provide ease of selection, its important providers remain appropriate and fit for purpose. This can be achieved by:

  • periodic review – this tests the baseline requirements for each transition provider to ensure the service level deliverables as contracted can be sufficiently provided; and
  • panel selection – this can be a full or partial RFP across all providers, which tests all aspects of the transition service deliverables. In considering the addition of a provider to a panel or the formation of a panel, it is key to consider a mix of specialisms, as opposed to selecting three good all-rounders.

Event selection

The choice of transition manager is often determined by a competition of estimate of costs. Lowest tends to win. This works where estimates are always aligned with results, but sadly that isn’t the case. Determining the best provider for the job requires:

  • understanding of individual transition providers capabilities and weaknesses
  • understanding and experience of required transition solution
  • independent assessment of costs and risks (removing “low balls”)
  • efficient process for selection (as below)
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Our thinking

Following on from MJ Hudson’s transition manager survey, in 2017 , we have teamed up with market-leading Netherlands-based fiduciary manager, Blue Sky Group, to conduct a second exercise, reviewing the track record of transition managers. This work is significant as, until now, little has been published on transition track records.
Benchmarking reports
Transition Management Performance – Meeting or missing expectation
In Alternative investing, dry powder refers to the committed but undrawn value of capital, which also must be ready for engagement. In 2020, estimated dry powder commitments reached $2.5trillion which is roughly 30% of the total value in private equity, private debt and real assets (the close-ended fund type) combined.
White paper
Safe Storage of Dry Powder – A Committed Capital Solution
video
Transition management – an overview
Our transition services provide you with the tools and resources to ensure that transition events are executed smoothly and uncostly. Our core belief is that the best outcomes stem from an honest, unconflicted and customised approach.
webinar
The costs of investment transition – hit or miss? Co-hosted with Blue Sky Group
Steve Webster hosts a webinar with Blue Sky Group to discuss: global transition manager performance, what drives transition performance, why do transition results matter and were do transition managers make a difference.
We interviewed Oliver Gottschalg, founder of MJ Hudson Fund performance analytics to discuss LPs, portfolios, credit lines and more.
We interviewed one of the most respected, experienced and cited professors in private markets, Steven Kaplan, Booth School of Business.
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