Northern Trust flags China, Philippines plans

CEO Rick Waddell says the firm does not intend to seek a licence to conduct onshore custody business in China, but is targeting Asian family offices.
Northern Trust flags China, Philippines plans

Asset management and servicing firm Northern Trust has been busy building a large operational and back-office team in India and plans to follow that up next year with a presence in the Philippines.

The company also has its eye on other businesses in Asia, including the growing family office segment, global custody services for Chinese clients and expanding its Korean client base, says chairman and chief executive Rick Waddell.

Northern Trust is planning to build a back-office/operational presence in the Philippines similar to that in Bangalore, with a view to being able to service clients more effectively across Asia, he tells AsianInvestor. This will give the firm a more complete time-zone coverage from the US to Australia.

“When we started in Bangalore in 2005, we projected getting to 400-500 staff,” Waddell said during a visit to Hong Kong this week. “Now we are over 3,000. I’d be delighted if we achieved that in Manila.”

In terms of timeframe, the bulk of investment in the Philippines will be done in the second half of 2014, he notes. Substantial groundwork is being done there now, such as putting in place the legal documentation to set up entities that the firm will need, looking at office space and starting to look at hiring.

Asked about the initial headcount, Waddell says Northern Trust is starting off “pretty modest” in terms of its expectations, to avoid over-committing to property and staffing.

With regard to the company’s ambitions in Southeast Asia as a whole, it is “starting to make headway” in countries such as Brunei and Malaysia in terms of attracting clients.

“If we achieve significant scale of business in particular markets, and clients tell us we can do more for them, we’ll open up offices in those places,” he adds. “That’s how we started in Australia and Singapore.”

South Korea is another focus market, where Northern Trust is set to start working with an experienced specialist consultant on the ground. The aim is to help it access the market, where it now has its first institutional client for its asset servicing capabilities. Waddell declined to disclose the name of the organisation.

The initial remit for the consultant will be to conduct research and make introductions in the market. “The right servicing model will come out of that,” says Waddell.

One thing Northern Trust does not plan on doing is moving into the Chinese onshore custody business, despite the fact that foreign banks and domestic securities firms can apply for approval to do so as of June 1.

“We’re not looking at custody onshore [on the mainland],” says Waddell, who recently spent three days in Beijing talking to clients. “Our whole plan in China is to be a preferred global custodian. We have no interest in being a direct custodian there.”

He points to the “huge wall of capital” that will be looking to move offshore that the firm can service.

Waddell admits it would not be easy to challenge the large Chinese banks on their home turf in any case. Others have pointed out that the fund custody business tends to go to the big mainland banks such as ICBC because of their investment product distribution dominance.

Meanwhile, Northern Trust also plans to target the family office segment in Asia.

Waddell points out that half of the group’s revenues and profitability come from private wealth clients. And he sees great potential for servicing the growing number of rich families setting up large offices that are looking to invest around the world and therefore want global capabilities.

“By dint of our reputation we have acquired family office clients in this region,” he says. “But we’re looking at putting together a more formal programme in terms of marketing our products and capabilities.”

Another area where Northern Trust is seeing interest is the hedge fund administration platform – Omnium – it acquired from Citadel two years ago. Since then it has trebled the number of clients on the platform globally, admittedly from a low base. Waddell says there’s been a lot of interest from sovereign wealth funds in using the platform.

“What has been interesting about the Omnium acquisition is that it has opened our ability to service firms other than hedge funds on this same global platform.”

¬ Haymarket Media Limited. All rights reserved.