GREENWICH, Conn. — Nearly half of pension executives do not use a formal search process when looking for a transition manager, relying instead on either a firm that handled a previous transition or a firm with an existing relationship such as the plan's custodian or money manager, a new Greenwich Associates report shows.
According to the survey of 194 executives, only 10% use a formal RFP process; 45% do not use a formal search process for transition managers; and 44% seek the advice of their investment consultant.
"To the degree that transitions are something done with very high urgency and plan sponsors can turn to people who know their organization well either because they've done it before or they are the custodian or a large passive manager, the results are not surprising," explained William Wechsler, a Greenwich consultant and one of the report's authors.
"But they are (surprising) in that you'd be hard-pressed to find other parts of this business where people leave decisions to such an informal mechanism," he said in an interview.
The 44% of pension executives who use their investment consultant might not be getting the best advice because consultants' knowledge of transition management varies widely, according to the report.