Super funds lose in manager change
The transition of portfolio assets when changing fund managers is resulting in higher costs and loss of performance for superannuation funds according to Frank Russell transaction services director Robert Werner.
The transition of portfolio assets when changing fund managers is resulting in higher costs and loss of performance for superannuation funds according to Frank Russell transaction services director Robert Werner.
According to Werner super funds are either not implementing a change in fund manager properly or miscalculating the costs involved.
“Regardless of what is driving a change in fund managers many super funds are either not making the move to another manager efficiently or they are underestimating the costs involved,” Werner says.
“From what we have seen, and this is on a global basis, such actions are costing the average fund an annualised 50 basis points.”
Werner says this does have an impact on the retail market since that where the original funds are sourced.
“This has a real effect in a retail environment. We do transition management for clients at an institutional level but they sell the worth of these funds at a retail level.”
The comments come as Frank Russell announce the appointment of transition services client executive Rob Ciro from the group’s US headquarters to Frank to its Sydney office.
The addition of Ciro has been driven by a growth and changes in the market according to Werner and by the need for funds to add value in the transition process.
So far the group has been involved with about 15 transitions in 18 months with Werner stating they would like to be involved with 50 over a two year period.
He says that since only 30 per cent of super funds use transition managers, this is an achievable target.
“We looked at the market which had grown in size and been through changes. We saw changes in mandates and the way that was approached and felt people were doing transitions poorly,” Werner says.
“We believe this is a major value add but is not worth the super funds generating a department to handle this as that’s not what they do.”
Werner says one of the main reasons this part of the industry has not received a lot of publicity is that by its very nature, confidentiality is the main issue.
“We need to keep news of the trading of a portfolio down to avoid any volatility in prices and avoid losing on the trade. As such we aim to be done before the market knows what has happened,” Werner says.
AUTHOR
Jason Spits
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