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Asset trends hit transition management
14 November 2013
BlackRock marks 20 years in transition management by renewing its relationship with its longest retained client, RailPen
BlackRock's global transition management business has
doubled the amount of fixed income assets it handled as a
proportion of its business from 17% to 33% over the past two
Lachlan French, global head of transition management at
BlackRock, says that this is just the latest shift asset
allocations in the 20 years that the bank has been in the
For instance, the client base has broadened significantly away
from the original transition business of defined benefit
pension schemes to include re/insurance companies, wealth
managers, charities, sovereign wealth funds and defined
contribution pension scheme.
"The range of different asset classes have also expanded
greatly and nowadays we transition more fixed income, emerging
market and complex multi-asset portfolios," he said. "The level
of service, transparency and the speed of implementation have
also progressed significantly."
He noted that certain financial market trends were making
transitions more challenging. For instance, the requirement for
investment banks and market counterparties to de-risk and
deleverage has had a negative impact on liquidity and thus made
it more difficult to transact significant portfolio
"Therefore, we have had to develop enhanced execution
strategies including the use of dark pools and algorithms or
other methods of obtaining best execution for our clients," he
said. "An important aspect for clients is our ability to trade
with a broader range of counterparties in order to achieve the
best price for them."
For French, transition management consists of three components:
client service, risk management services and execution. "You
have to be able to deliver in all three of those areas. Our
objective is to provide clients with value for money, greater
transparency, increase in the speed to market and excellence in
execution and risk management," he said.
In the 20 years BlackRock has provided transition management
services, it has transitioned over £3.5trn of assets.
Recently the firm has continued its relationship with its
longest retained client, the £20bn Railways Pension
Scheme, and was the transition manager for a complex liability
driven investment portfolio in 2012's landmark restructuring of
the Royal Mail Pension Plan. It says it continues to see strong
demand from institutional investors.