Transition costs could undermine new manager gains. (Trends: Investments & Benefits)

Pension plan sponsors, under the gun to deliver investment results that will minimize corporate contributions, are pushing their active fund managers and changing managers when results are slow to materialize.

One result is more manager turnover, which introduces transition costs that must be recognized and managed. Data from Greenwich Associates, Greenwich, CT, show that 28% of all funds fired investment managers in 1903 and 42% hired new managers.

"There is less tolerance for underperformance now," says John O. Hunnicutt, vice president for administration and manager of the pension plan for Dibrell Brothers, Danville, VA. "Everybody expects instant results these days."

Changing managers requires the plan to reclaim assets from one manager and provide funds to the replacement manager. "There is a growing recognition that the cost of switching managers is high," perhaps 1-2% of the portfolio, says Rodger Smith, partner at Greenwich …