July – a normally quiet month in transition management – was anything but this year.
There were 31 transition management transactions last month, involving a combined $23 billion in assets, based on data from Harbor Analytics LLC, Hingham, Mass.
Those transactions accounted for 27% of the total through July 31, said Ross McLellan, president of Harbor Analytics, a transition management research firm.
In the first seven months of the year, 117 transition management transactions were made involving a total of $86 billion.
Based on forecasts for transactions through the end of 2014, July transactions are expected to represent 16% of total activity for 2014 — three times the annual average for the month since 2012, when Harbor first began compiling transition data.
While the increase has been evident, industry experts couldn't say why the dog days of July weren't this year.
“There's no rhyme or reason” for the July increase, said Mr. McLellan. “They're all different clients doing different things for different reasons.”
Added Thomas Schoenbeck, senior investment consultant at Hewitt EnnisKnupp, Chicago: “There's been no major theme spurring the increase in July. We've had movements in all types of asset classes. It's just been a busier summer.”
Mr. Schoenbeck said transitions were made across the board among their client types: outsourced chief investment officer firms, pension funds, endowments and foundations.
In the first quarter, 41 transactions were made, or 35% of all transactions through July, on a total of $31 billion in assets. In the second quarter, 45 transactions, or 38%, involved $32 billion in assets transitioned.
Strong equity returns led many investors to maintain their asset allocations in the first half of 2014, resulting in fewer transitions, Mr. McLellan said.
Mr. Schoenbeck added that strong returns in the first six months of the year extended to fixed income, meaning fewer transitions in that asset class as well. “Performance has been strong,” Mr. Schoenbeck said. “The market didn't really make moves. It's the same whether with equities or fixed income.”
Mr. McLellan said that based on projections for transactions through the end of the year, the first quarter will have 21% of all 2014 transactions while the second quarter will have 22%.
The second half should see an increase in transition management transactions, Mr. McLellan said, because of expected higher turnover in international and emerging markets equities and more changes in fixed-income allocations, including high yield.
Mr. Schoenbeck said if recent volatility in the equity markets increases, there could be more transitions through the end of the year. “If that volatility increases, it might cause more (asset owners) to speed up their allocation changes,” said Mr. Schoenbeck. “But for now, we haven't seen any indication from clients that they will do that in the near future.”
