Decisions by two transition managers to shutter their U.S. operations are changing some pension funds' game plans.
J.P. Morgan Chase & Co. is closing its global transition management business and Credit Suisse Group is shutting its U.S. business, reflecting what consultants and others say is the difficulty of maintaining adequate profitability in an increasingly tight regulatory environment.
One pension fund reassessing its lineup is the $39.6 billion Teachers' Retirement System of the State of Illinois, Springfield, which just last year selected J.P. Morgan Chase and Credit Suisse to be in its stable of five transition managers. The others were State Street Bank, Citigroup and Loop Capital Markets LLC.
Illinois Teachers' officials will go back to the transition management search list used last year and “refresh the RFIs” with an eye toward replacing the two, R. Stanley Rupnik, chief investment officer, said at an investment committee meeting on May 22.
A variety of regulations globally are pushing banks out of transition management, Greg Turk, TRS director of investments, told trustees at the meeting.
Other pension funds might rework their pools of transition managers sooner than expected because of the departures. The $13.4 billion Public Employees Retirement Association of New Mexico, Santa Fe, which had Credit Suisse in its transition manager pool, plans no immediate search because of the firm's exit, said CIO Joelle Mevi.
J.P. Morgan Chase will wind down its transition management business — with the exception of Australia — over the coming weeks, said company spokesman Justin Perras. Mr. Perras said he could not comment on why J.P Morgan Chase was exiting the business, but a company source who requested anonymity said executives had determined it was not a core business in the company's worldwide operations. He would not elaborate.
Credit Suisse spokeswoman Katherine Herring also said she could not comment. But a company source, who also requested not to be identified, confirmed the bank is in the process of closing its U.S. transition management business, which has five staffers. The European transition management business is not affected.
Neither company discloses transition management volume.