Transitions industry woes persist
The transition management industry in Asia Pacific is continuing its steady slide, with the reported closure of BNY Mellon's TM operations globally and JP Morgan’s Australian transitions business further evidence of the trend.
BNY Mellon is in the process of shutting down its global transition management operations, reported aiCIO yesterday. Mark Keleher runs the business out of San Francisco. Tim Steele, global head of media relations, was quoted as saying that the company expects to have ceased all activity in the area “within the next couple of months”.
BNY Mellon was not immediately available for comment.
Moreover, the recent departure from Mercer’s Hong Kong office of Nick McDonald after seven years would appear to reinforce the trend. He left his post as principal in December; his consulting remit had included transitions, but also operational risk, custody and fund administration. The TM business is not thought to constitute a significant portion of Mercer’s regional revenue.
McDonald will not be replaced, with his responsibilities now spread elsewhere around the firm, say sources. It is understood he will be taking on a new role in April in financial services, but AsianInvestor could not ascertain what it would be.
He was a key member of the investment team, but Mercer's Asia business always has a high degree of support from other regions, so it remains business as usual, says senior associate Craig Plane, who worked in the unit with McDonald for six-and-a-half years.
Meanwhile, the closure of JP Morgan’s Australian TM business – news of which emerged last week – follows its US and European units being shut in May last year. Prior to that, Asia TM head Duncan Klein had been laid off in summer of 2012, leaving Patrick Fanning in Sydney as the regional head of the business.
JP Morgan is said to be exploring options for potentially redeploying the team internally; it is not known whether any individuals have yet taken up new roles.
The Australian business was reportedly given extra time after the US and European closure to support its local clients and discuss with them their likely future demands.
JP Morgan declined to comment.
These moves come against a backdrop of transition managers being hit with fines recently for overcharging clients – Convergex in December in the UK, and State Street in January in the US.
The number of firms with dedicated TM staff in Asia Pacific has fallen heavily over the past two years, with AsianInvestor having run several stories about the problems facing the industry.
Casualties have included Credit Suisse, which closed its global TM business and saw Tom Wyse leave last year; and Morgan Stanley, with Richard Surrency exiting in early 2012. Moreover, Deutsche Bank laid off Tom Clapham in the summer of 2012, and David Gagnon departed BlackRock earlier that year.
Firms retaining TM operations in Asia Pacific include BlackRock, Citi, Goldman Sachs, Russell Investments, State Street and UBS. But industry sources say it may only be a matter of time before more cuts emerge.
Transition managers – which help institutions wind down portfolios, fund new ones or switch between mandates or asset classes – note that TM volumes have fallen substantially over recent years.
One executive familiar with Asia’s TM industry had presciently said in August 2012: “Fundamentally investment banks are getting out of TM because it’s not a flow business, and in these market conditions, flow is the name of the game. At all the major investment banks now, if you can’t demonstrate flow today and tomorrow, you’re likely out the door.”