August 24, 2020
First Actuarial has seen a sizeable increase in asset transition activity this year and is on track for a record year, despite the challenges presented by Covid-19. Richard Lunt discusses the background to this increase in activity.
First Actuarial’s asset transitions team has been involved in more than 50 asset transitions so far this year, despite having to put a significant number of planned transitions on hold due to Covid-19. A further 35 transitions are in progress which, when complete, will bring total assets moved so far in 2020 to over £700m. This is a record for the team at this stage in the year, and quite an achievement given that none of us have been able to work in the office since March.
At the time of writing there is no sign of a drop-off in transition activity, and we expect that trade volumes will be well over £1bn by the end of the year. That said, we have the potential headwinds of a second wave, of course, as well as the Brexit trade negotiations to get through. Nimble and co-ordinated strategic and implementation decisions will be needed to weather conditions as uncertain as these.
Covid-19 and asset transitions
Part of the increase in activity has resulted from the high levels of market volatility associated with the pandemic. Many of our clients had put triggers in place based on market levels and, with the volatility of the past quarter, these led to increased investment strategy changes and asset movements as thresholds were met.
Many of these trigger strategies were put in place immediately after the initial dramatic market falls that took place early in the pandemic. Time is of the essence with trigger strategies in volatile conditions, and our agile transitions team has been quick to plan and implement a range of changes – sometimes at very short notice – to help individual clients respond to market conditions in the most effective way.
Our team has worked hard with investment managers to make sure all transactions take place as smoothly as possible, and the increased volume of transitions has given us a greater understanding of the individual requirements the different managers have. This has allowed us to become even more efficient when moving money.
Covid-19 has also presented practical challenges brought about by the shift to homeworking. One specific problem has been obtaining the necessary signatures, something that was much more straightforward in office life. Through conversations with asset managers, we have worked hard to identify all the signing options available to trustees, negotiating concessions where possible. Trustees are now able to authorise and instruct transition activity while working at home in the vast majority of cases.
The real secret to First Actuarial’s transitions success
Moving large sums of money – sometimes hundreds of millions of pounds – is laden with risk. The consequences of getting an asset transition wrong can be very costly. Scheme trustees need to be able to put their trust in the people who move money on their behalf. They can only do this with highly professional and experienced advisers.
Our dedicated transitions team is led by specialists with decades of experience across a wide range of investment managers and asset classes. The two team leaders, Mitesh Dayalji and Andrew Grant, share almost half a century’s investment experience, including 17 years dealing exclusively with asset transitions.
We are highly practised at handling the differing requirements of all the fund managers. We know that the biggest risks with asset transitions are getting the amounts or the timing wrong, so that’s what we focus on. We mitigate those risks by combining our professional expertise with robust and proven processes.
Another reason for our growing popularity among trustees is our competitive fees. With no external shareholders to answer to, we are free to charge a fair price for the job and we have no target chargeable hours. Our efficiencies, coupled with the nature of First Actuarial, make our fees lower.
Our investment services business model is to employ advisers who are experienced and capable of providing good quality advice efficiently. Whereas other organisations assign junior staff members to more modest-sized schemes, we provide experienced resource every time. Our clients seem to appreciate that. And there’s nothing to stop trustees from using one firm for investment advice and then working with First Actuarial to arrange the asset transition. We work flexibly under such circumstances, and expect to see a growth in transition-only mandates this area in the coming years.
Demand for our investment services has increased exponentially over the past five years, and our wider investment team has grown with it. The success of our investment team has in turn has generated more and more asset transition work, allowing us to grow our team. Together, we offer the expertise trustees need to navigate the choppy market conditions we’ve all come to expect.