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In October 2007, European transition management providers agreed on a code of best practice that is now accepted by clients and their advisors as a blueprint for conducting business in this marketplace.
From time to time large investment funds need to make significant changes to their investment arrangements; these asset restructurings may be prompted by performance issues, actuarial advice, sponsor changes, new regulatory requirements, or new investment opportunities. To implement the required changes, it has become increasingly commonplace to employ the services of a speciahst manager. This "transition manager" reduces costs, controls risks, and provides efficient project management. The number of transition management service providers has grown rapidly as asset managers, investment banks, custodians, and investment advisers compete for these restructuring assignments. This growth in the complexity and in the number of providers meant that trustees and their investment advisers found it increasingly difficult to compare the services, cost estimates, fee quotations, and performance results of the competing transition managers due to the fundamental differences in their business models and dealing practices.
At a transition management conference in December 2004, the industry was accused of poor practice and a lack of standards. The attack was prompted by a number of frustrations with, and suspicions of, transition manager practices. The following list gives a flavor of the complaints:
* Transition managers supply cost estimates that cannot be compared to one another.
* Transition managers have conflicts of interest that are not disclosed.
* Some transition managers may take undisclosed remuneration.
* Some transition managers may provide unrealistic cost estimates to win business.
* Some transition managers may propose dealing strategies that favor themselves.
* Some transition managers may engage in pre-hedging without the client's knowledge.
* Some transition managers may not keep information confidential.
* Some transition managers may not have all the resources required for the task.
* Not all transition managers calculate their performance in the same way.
* Some transition managers may not be reporting their errors.
Six weeks later, the leading transition management firms came together to discuss the issues that had been raised. These were the first tentative steps toward an industry code of best practice. This code, known as the "T-Charter," was finally launched on October 22, 2007, with...