By Tan Lee Hock
Teresa Parker, the Asia-Pacific chief executive officer of Northern Trust has certainly come a long way in her nearly 28-year career with the Chicago-headquartered bank; with a strong background in operations, she has risen steadily up the corporate ladder, taking her from Chicago to London (where she spent 15 years, latterly as head of Europe, Middle-East and Africa) before moving to Singapore last September as the boss for the Asia-Pacific region. More than a year after the global market’s dislocation in 2008, things are once again looking up; so global custodians such as Northern Trust have been busy eyeing the new opportunities that are now emerging.
For Northern Trust, Australia and China are key markets to focus on along with Japan where the bank is scaling up its asset management platform there; back in 2002, Northern Trust acquired a book of passively managed assets from Deutsche Bank and that deal came with a fairly sizeable portfolio of domestic clients. Since then, a slew of products and investment strategies have been added, including multi-manager programmes and a fund of hedge funds. “We are ramping up our manufacturing presence in Japan given the opportunities there,” says Ms. Parker.
In Australia, Northern Trust broke new ground when it won a historic mandate from the US$42 billion Future Fund in 2007 as its global custodian; since that landmark win, the bank has gone on to secure more business in the local market from its 20-person office in Melbourne. “We see a lot more potential in Australia as clients from that market seek more global solutions from an asset management and asset servicing perspective,” she says. New services are being added to its offerings in Australia this year to tap into the tax driven assets of that market. The superannuation industry now has more than A$1.5 trillion (US$1.32 trillion) of assets, making it among the top five centres globally for pension assets. Interestingly, given this humongous scale, the allocations to Asia have traditionally been low so there may be meaningful opportunities for global managers to address too.
Meanwhile, China may be a huge market for global banks but their options until recently have been rather limited. The QDII programme is one where global providers such as Northern Trust can play a role in working with local Mainland banks but it is also one that is fast becoming a cut throat market as margins narrow across product lines. An ongoing challenge for global players in China, too, has always been the regulatory risks.
Northern Trust has a rep office in Beijing, led by Michael Wu, an ex-State Street banker who was recently made a senior vice president. “We have been spending time on investor education there, explaining to institutional investors the new asset classes and the trends and issues affecting them. It is part of our efforts at positioning for the long-term,” says Ms. Parker.
Long-term and financial conservatism are themes that Ms. Parker mentions more than once in her dealings with Mainland institutions and investors. “It resonates well with them as they understand how we approach our business,” she says. And to stress the point, she mentions that more than half of all existing relationships that Northern Trust currently has with its clients globally are more than ten years old.
Is she satisfied with the bank’s current footprint in Asia? “I think we are well-placed for what we are doing right now. Of course we are also looking to expand our network but this is not on the agenda for 2010,” she says. The bank recently undertook a review of its current service offerings in the region. In transition management, Ms. Parker says local support is required to roll out the product in Asia. “That is something that we have to address.” As for its asset management franchise, Ms. Parker says the bank has seen renewed interest for its cash management and indexing capabilities as well as its multi-manager and hedge fund platforms. There are no plans to step back into the ring in the world of ETFs after the bank exited the business sometime ago. “We took a conscious decision to do that so now we are not looking to go back in as an asset manager or in asset servicing.”
As for wealth management, an area which has seen quite a bit of M&A activity in the region following the market turmoil, Ms. Parker says the bank is currently focused on Europe alongside of its entrenched business in North America. “We do of course see the big trends here in Asia in terms of wealth creation so I can see that we can be involved, perhaps working with the leading family offices here.”