In the two decades since Northern Trust first extended its custody offering beyond the US market, the Chicago-based bank has established itself as the provider to beat when it comes to servicing private and public pension funds. Last year Northern won no less than 49 new European mandates, collectively worth a total of $66bn (e75.6bn). These included Nestlé Switzerland, CCLA Investment Management, Equitable Life, London Borough of Haringey Pension Fund, ANZ UK Staff Pension Scheme and Nobel Foundation. Most recently the bank took over the £930m (e1.5bn) Tayside Superannuation Fund, bringing the number of UK local authority clients on its books up to 22.
“Northern remains committed to service rather than gathering assets and repackaging a standard product – we spend more time building relationships on a consultative basis,” says Penelope Biggs, head of international sales and global fund services practice. She cites Northern’s appointment in January by the NLG13bn (e5.9bn) PMI Pension Fund in the Netherlands. “That was a landmark deal for us, and involved a long process of consulting, educating, training and tailoring,” says Biggs. “That takes time and effort but it ultimately reaps rewards, and I don’t think we would win those sorts of mandates if we just tried to penetrate the market with a packaged product.”
Adds Jemma Broadgate, vice-president, corporate and institutional services: “A lot of European markets are still fiercely patriotic so we have had to work very hard at building up our reputation at a local level from scratch.” However, where Northern has gained some leverage as a result of its successes in the US and UK is in its relationships with multinational clients. “Multinationals are a unique challenge – you are not only delivering a local version of the global custody service to the local pension plan and their trustees, but you then have to be able to deliver a highly customised version to the head office to allow them to look across all their plans’ assets at their total exposure and risk,” says Broadgate.
“For example, the pensions accounting manager in the back office in Europe probably wants to look at his valuations, his trades, all his general statements about the assets in his portfolio,” adds Biggs. “However the chief financial officer may also have responsibility for the pension fund and he will want to be able to access a customised screen showing how the market has performed and how the performance of the stocks in his pension fund measures up to that.” To this end, Northern is evolving its Passport online reporting package. The next generation Global Investor Passport (GIP) uses portal-based technology to integrate third-party information to give the client a personalised snapshot of their portfolio, along with performance and risk data and relevant industry news and market information. Now in the final stages of testing, GIP is set for rollout later this year.
Another enhancement to Passport is already up and running. Developed in conjunction with data collection and analysis specialists Thomson Financial/Vestek, Fund Peek Through allows a pension fund client to drill down into an investment fund to get a detailed picture of all its holdings therein. “A lot of clients will have holdings in many pooled funds and they are increasingly uneasy that they do not know from day to day what stocks actually make up their holdings in those funds,” says Biggs. “We have always been able to do give them that basic information, but prior to Fund Peek Through what we couldn’t do so easily was to combine their index fund assets with their directly held assets. So we can now show them a consolidated picture of their exposure to a certain stock.”
Having taken over Ulster Bank Investor Services in May 2001 – now rebranded Northern Trust Ireland – the bank has also introduced a new pan-European pension fund pooling product out of Dublin with a view to helping European pension plans overcome the difficulties inherent in commingling assets held across the region. “It is the first of its type and has allowed a couple of our very large multinational clients to amalgamate their European pension fund assets into a pooled fund, the structure of which has enabled them to both reduce cost and enhance investment performance,” says Biggs. “We believe this product to be unique in the market and certainly its development exemplifies the type of consultative approach we adopt with our clients.”
Given the emphasis that Northern has always placed, and continues to place, on client consultation and service, the bank’s poor showing in the recent R&M Consultant’s global custody survey – ranked tenth in the pension funds category, down from fifth 12 months ago – was for Broadgate at once a disappointment and something of a mystery. “This year’s results have been something of a surprise,” she says. “They are certainly incongruous with the feedback we have been getting over the last 12 months from consultants, clients and prospective clients. In addition to maintaining an ongoing dialogue on all aspects of our service with existing clients, we are always diligent in eliciting feedback from new business opportunities and we recognise the important contribution made by good client references to our new business success.”