A newly released study by Mellon Transition Management (a branch of BNY Mellon Asset Management) shows that manager turnover in the institutional marketplace is slowing back to historical, pre-financial crisis levels. (Click here to read the Fundfire article about the study.) On the surface, great news, right? Maybe – maybe not.
On the bright side, this trend could be an indicator that now that the dust has settled, and the market has been on an uptrend , committees are taking more time in evaluating their managers before deciding to make any switches. It could also be reflective, as the article points out, of the fact that changing managers can be costly and time-consuming. There could also be compliance reasons for this slowing of manager changes.
In addition, even if managers are underperforming their peers, there is less of a “rush to judgement” in up markets.
On the flip side, the negative here for the investment management industry is that whatever the reason – time, cost, compliance, performance or some combination – its going to be harder to grow your AUM and get new clients. In a zero sum game like manager changes, one manager typically wins at another managers expense, a slowing trend is good for protecting what you have but not so good for growing your business.
The upshot is that if indeed manager transitions are slowing and taking longer when they do happen, then the importance of your marketing message and value-added proposition becomes more important than ever. In addition, client service takes on an increasingly important role in client retention.
To me at least, this slowdown in manager turnover is a net negative for most managers. What do you think?
