Adverse Selection - Risk that only liquid securities are crossed leaving illiquid securities and mismatched sectors.
Bid/Ask Spread - Difference between the lower bid (broker buys) and the higher ask (broker sells) for a security.
Credit Rating - A measure of a bond's quality as determined by a rating service. Ratings start at "AAA", the highest ranking, through "D" for bonds in default. The analysis uses Bloomberg composite ratings which are a blend of Standard and Poor's and Moody's.
Crossing (Internal) - Using a transition manager's access to index funds or other transition client flow to offset buys and sells. These security transfers are priced at the closing price of the day and are 100% free of commission and market impact costs since they are never shown to any brokers.
Crossing (External) - Using publicly available networks such as ITG's POSIT or Instinet to buy or sell securities at a pre-determined price. These trades are executed at low commission rates and market impact costs are reduced by either executing the match at the mid-point of the bid/ask spread or by pricing the trade at the market close.
Duration - The weighted average maturity of a securities future cash flows. A higher duration indicates greater price sensitivity to changes in interest rates.
Explicit Costs - Represents the most visible, but least significant cost of a trade. Includes commissions and fees.
Delay - Represents the loss in investment value between time of decision to trade and actual order release. Can also arise due to a jump in market prices from the prior night's close to the open, (i.e., open gap).
Fiduciary - Represents those who have discretionary authority or control over fund assets, are free from conflicts of interest, and must act in the interests of the participants of the plan.
Implementation Shortfall - Represents the difference in return between the actual portfolio and the target portfolio.
Implicit Costs - Represents the least visible, but most significant cost of a trade. Includes spread, market impact, timing risk, tracking error, and information leakage.
Information Leakage - The release of material information about a trade before the order is released to the market. Raises total costs since it allows arbitrageurs to trade ahead of the transition.
In-kind Transfers - Securities that are transferred from the legacy to target portfolio. These security contributions are priced at the closing price of the day and are 100% free of commission and market impact costs.
Legacy Portfolio - Portfolio that securities are being transitioned from.
Market Impact - Amount that a security price moves after placing a trade order.
Opportunity Costs - Cost associated with the time gap in transferring assets from the legacy portfolio to the target portfolio.
Over the Counter (OTC) - A dealer dominated trading market where securities exchange hands through direct negotiating between buyers and sellers. The majority of bonds and NASDAQ equity securities are traded OTC.
Pre-trade Analysis - An analysis detailing trading costs (commissions, taxes, market impact, bid/ask spread and opportunity costs), compared against an unmanaged transition providing characteristics of the legacy and target portfolios and highlighting problematic securities to be transitioned.
Post-trade Analysis - A comparison of the actual costs versus the pre-trade estimates of the transition and stated benchmark.
Principal Bid - Represents brokers who commit capital to facilitate trade at price set at a predetermined time in exchange for a premium. In the U.S., all principal trades are executed at the closing price. A blind bid is one that is submitted revealing only general characteristics of the securities, (beta, volatility), and not a specific list of securities.
Target Portfolio - Portfolio that securities are being transferred to.
Tracking Error - The expected deviation from the expected differences in returns between two portfolios.
Unmanaged Transition - Assumes that all trades are done in the open market without the benefit of in-kind transfers, internal crossing or external crossing.
Craig Blackbourn is a Senior Vice President and EMEA Head of Transition Management. Craig is charged with the long-term strategy of the group, client management and day-to-day operations.
Craig has extensive transition management experience, joining Northern Trust in December 2016 from Nomura (formerly Lehman Brothers) where he was head of transition management in EMEA and Asia excluding Japan. Prior to this, Craig spent two years at BNP Paribas Securities Services. In the 12 years previous to joining BNP Paribas, Craig held a number of managerial roles within various functions for the Deutsche Bank Group, including Global Custody and Asset Management, from which the firm offered transition management services to institutional investors.
Overall, Craig has more than 23 years of industry experience and 17 years’ experience in the transition management arena, where he has overseen the execution of some of the most complex events undertaken in the industry.
Gavin Mashford works within the Northern Trust Capital Markets sales and relationship management team as a Specialist, Transition Management. Based in London Gavin’s role is to focus on transition management sales and distribution, whilst working closely with clients and the transition managers to provide relationship management through a restructure.
Gavin joined the transition management team in September 2013. Before joining Northern Trust, Gavin spent seven years at Deutsche Bank where his responsibilities included; covering client service solutions and market initiatives for the derivatives team, specifically with regard to OTC and their regulation.Gavin graduated from Lincoln University with a BSc Honours degree in 2001.
© 2018 Northern Trust Corporation. Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A. Incorporated with limited liability in the U.S. Products and services provided by subsidiaries of Northern Trust Corporation may vary in different markets and are offered in accordance with local regulation. For more information, read our legal and regulatory information about individual market offices.
Northern Trust Asset Management is composed of Northern Trust Investments, Inc., Northern Trust Global Investments Limited, Northern Trust Global Investments Japan, K.K., NT Global Advisors, Inc., 50 South Capital Advisors, LLC, and personnel of The Northern Trust Company of Hong Kong Limited and The Northern Trust Company. This material is directed to professional clients only and is not intended for retail clients. For Asia-Pacific markets, it is directed to expert, institutional, professional and wholesale investors only and should not be relied upon by retail clients or investors. Issued in the United Kingdom by Northern Trust Global Investments Limited.