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Institutional investors taking longer to change investment managers, says Mellon Transition Management

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Institutional investors are taking far longer to change investment managers or asset allocations than they did before the 2008 financial crisis, according to Mellon Transition Management (MTM), the transition management specialist for BNY Mellon Asset Management.

"Since the financial crisis began in 2008, we have seen institutions take as long as a full year to complete the transitioning of their assets away from one investment manager to another after beginning their initial consultations with us," says Mark Keleher, co-founder of MTM and its chief executive officer. "This compares with a typical period of approximately two to four weeks before the crisis began."

MTM attributes the longer time periods to heightened compliance scrutiny across the institutional investment landscape as plan sponsors and investment managers deal with regulatory changes and governance challenges. Transition management trends that began after the financial crisis are continuing today, as institutions continue to move money away from home country equities to both longer term corporate bonds and international equities, Keleher believes.

"Transition management has evolved significantly since we opened our doors 10 years ago," he says. "While this service originated as a low cost way to change asset allocations or investment managers, the focus is now much more on risk control.  Increasingly, transition assignments involve multiple asset classes, illiquid securities, global markets and derivative overlays."

Part of the MTM group, BNY Mellon Beta Management, facilitates rebalancing programs and synthetic asset class exposure through the use of futures, swaps, index funds, and exchange-traded funds (ETFs), and can serve as a low-cost passive manager similar to an indexer over intermediate horizons.  The business, which was started in 2008, has over USD4.5 billion in notional overlay under management.

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