Interim Portfolio Management

There may be a time you need to remove a manager, possibly immediately, but no alternative manager is readily available. The process of finding a replacement could take months and in the meantime your portfolio will be different to the one you desire.

You have a number of options open to you, but many are sub-optimal:

Do nothing: While simple to implement, it does not solve the problem: the outgoing manager has no incentive to give the portfolio its full attention and you are paying some fees to a manager that you do not want

Care and maintenance: You ask the outgoing manager to freeze the portfolio and continue with corporate actions and administration. Again, whilst simple, you are ‘stuck’ with the active positions of the outgoing manager, no-one is responsible for performance in the interim and you may still be paying some fees to an unwanted manager.

Park in a passive fund: You remove the active risk and reduce management fees, but there may be significant initial and end transactions costs. Additionally, for larger investors with more specific requirements, pooled funds can be restricting and the solution can be inflexible if you have any bespoke requirements, such as a social screen.

Interim portfolio management: Let Russell Investments control exposures for you during the interim period. Russell Investments will manage to agreed guidelines using derivatives. This offers a solution which removes the majority of the active risk, keeps costs down in the interim and can be unwound quickly when you find a replacement.

Summary

  Do nothing Care and maintenance Park in a passive fund Interim portfolio management
Sound governance ? ? Yes Yes
Low management fees No ? Yes Yes
Cost-effective transaction ? ? ? Yes
Bespoke & flexible No No No Yes
Evergreen solutions No No No Yes

Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.

The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested.

 

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