Moving Assets from One Safe Place to Another – on the Grandest Scale Imaginable

One of the lesser known but vitally important cogs that turns in the orchestrated ecosystems of the world’s financial services industry is Transition Management – or, as we call it at Northern Trust, Portfolio Solutions.

What is it?

Transition Management is essentially project management. It’s the efficient, well-managed movement of pools of assets (stocks, bonds, derivatives and a multitude of other financial instruments) from one ‘shape’ to another. Typically that’s from one investment manager to another, sometimes internal but often between external managers. 

What’s so complicated about that?

We’re not talking about a simple bank transfer move of cash from one account to another – it’s much more complex than that. Our Portfolio Solutions teams work on transitions involving billions of dollars of assets.

The challenge, and the reason why some of the sharpest asset owners in the world hire our Portfolio Solutions teams in Sydney, London, and Chicago to do this, lies in understanding and managing three W’s:

• Why an asset needs to be moved.
• When it needs to be moved.
• Where it’s being moved to and from.

What’s the big deal?

Not that long ago, a transition involved changing the beneficial ownership of an asset or instrument, or a pool of assets and instruments, with the target of making that move and incurring the minimum possible “time out of the market.” 

Time out of the market, no matter how short, risks price action moving against an investor. Transition Management was the activity designed to minimise that. 

Yes sure, understood, but surely that’s just business as usual for a large financial institution?

You might think that but no, it’s not. As we set out below, there are myriad complications that need to be addressed and managed in any project that involves moving multiple financial instruments from one structure to another. 

At any one time there can be multiple layers of assets and financial instruments moving about in the electronic ether, meaning the outbound structure and inbound structure need to engage in a choreographed, almost balletic ‘dance’ that requires crisp, clear orchestration.

That’s why Northern Trust has evolved Transition Management into Portfolio Solutions, and that’s where our Portfolio Solutions teams come in. They are expert orchestrators of a complicated, multi-layered effort involving numerous moving parts, multiple participants and multiple interested and engaged parties. 

OK, tell us more. What industry trends are northern trust’s portfolio solutions teams seeing?

Lately, we see three key trends shaping the investment landscape: heightened market volatility, a growing demand for performance-driven transitions, and a notable rise in fixed income transition activity. These trends reflect how investors are rethinking risk, agility, and cost-efficiency in today’s dynamic environment—and Northern Trust Portfolio Solutions is helping them stay ahead of the curve.

1.  Managing Market Volatility

• Challenge: Investment managers are concerned about managing market volatility. Recent volatility, especially in Q2 and Q3 2025, has led to dislocation between sectors, countries, and asset classes. Funds want flexibility and to be nimble in repositioning their portfolios.
• Portfolio Solution’s approach: Futures overlays – part of our kit of Exposure Solutions tools. Futures, which are highly liquid and require low initial margin, are also a quick and easy way to manage market volatility, especially when compared to the ‘old world technique’ of trading physical securities. Our Portfolio Solutions teams set up futures accounts for asset owners so they can adjust asset allocation changes rapidly and in a simple, efficient manner.

2. Migrating From Lower Performance to Seek Improved Returns

• Challenge: Large pools of assets are always moving about seeking better performance. Fund management strategies cycle through periods of being in and out of favour. Our Portfolio Solutions teams are often engaged by the sharpest investors in the world to help manage that process.

We’ve observed over time and through hundreds of engagements that there can be something of a 'race to the door' when a specific investment strategy or approach falls out of favour.

• Portfolio Solutions’ approach: We can implement a program of interim exposure whilst an asset owner takes time to decide on the next strategy in which they wish to invest, the next manager they wish to appoint. Ultimately, the program serves as a sensible safety net while careful attention is paid to due diligence, IMA negotiations, and other such necessities.

On an interim basis, the precise ‘interim’ term at the discretion of the controlling manager, our Portfolio Solutions team has the tools and capabilities to manage a portfolio in a rules-based, non-discretionary manner, managing the portfolio names to target weights, managing cashflows and behaving in line with the investment models inherent in the fund structure.

As a key benefit to the investor, Interim Exposure allows a manager to ‘change shape’ more efficiently and give them time to appoint new managers whilst maintaining market exposure. 

The latter point is very important. Our Interim Exposure framework gives managers the most precious resource available in the markets: time. Time to make good choices and decisions, safe in the knowledge that our models are aligned with their best interests.

While it would be lovely to think we could live by Cher’s 1989 smash hit record “Turn Back Time”, we can’t – but we can at least help investment managers “manage time” in ways that deserve careful consideration.

As a sidenote, if you’re interested in some 36-year-old music history, the video was filmed on the foredeck of one of the US Navy’s giant battleships “USS Missouri” with the support of the Navy and the full-throated bellowing of the ship’s crew. It’s available in all the usual places.

3. Growth in Fixed Income Transition Management

• Challenge: The world has changed and some of the relatively unsophisticated ‘move at scale’ techniques of the past for fixed income assets are being superseded by methodologies that are more advantageous to a fund’s performance.

What do we mean by that? Historically, investment managers were asked to sell holdings, convert into cash and then as a second step, buy into target portfolios. Why is that clumsy? In the modern financial world where an investor in Sydney or Singapore or Seattle invests cross-border, such a stepwise process introduces market risk, cross-currency risk, and line-by-line instrument risk to the change management project.

Another alternative involves legacy portfolios transferred to new managers who then typically ask for a performance holiday whilst they reshape the portfolio into the agreed future profile. 

And third and most importantly, the long-held market opinion was that the bonds in a migrating portfolio were the easy bit. Fixed income was thought to be less volatile than equities, so there was less need to engage a transition manager to move them from shape A to shape B.

• Portfolio Solutions’ approach: Market volatility appears to be a feature rather than a bug now, and performance holiday requests continue to be a flow through the portfolio transition world. We are observing investment managers actively including fixed income assets in their transition plans and looking for the most efficient, cost-effective methods of transfer. As an example, on a recent fixed income transition, we identified 85% of the trade as in-kinds (common securities between portfolios), reducing trading costs for the client significantly. 

Our own data, generated from transitions across the globe, indicates that fixed income transition volumes doubled last year. We believe that our Portfolio Solutions work can help preserve performance. The pre-change modelling we do in league with the managers involved can help identify the most efficient path forward, minimising risk, cost and time out of the market. Our solution minimises the need for a performance holiday, meaning limited risk of disruption to the marketability of a fund. At the point where the portfolio is handed over to the target investment manager, that manager commences their portfolio management duties. 

Our bond transitions data tells a strong story. Bearing in mind we use a third-party data specialist for this analysis and we don’t mark our own work, Figure 1 shows our fixed income performance year to date in 2025. The average mean estimate from the pre-trade analysis for the year is 31.4 bps, with average actual performance of 21.4 bps.

In layman’s terms, our desks outperformed the pre-transition modelling expectation, generated improved outcomes, avoiding the risk of assets being out of the market and thereby helping avoid market slippage. These were good results for the originating party to the transition.

Our Portfolio Solutions team continues to redefine what effective Transition Management looks like in today’s fast-moving markets. By combining deep market insight with tested methodologies, we aim to help investors manage complexity, reduce risk, and preserve performance during times of change. 

Whether navigating volatility with futures overlays, implementing interim exposure strategies, or optimizing fixed income transitions, the team strives to deliver solutions that are both agile and precise. As asset owners seek smarter ways to reposition portfolios amid near-constant volatility, our teams are ready to assist with the expertise, tools, and global reach to deliver a smooth transition.