Northern Trust has hired former central banker Ariani Rustam to head its new operation in Kuala Lumpur, as the custodian bank seeks to service growing demand for overseas investments from institutions in Asia.
The representative office is the firm’s seventh branch in Asia and will seek to expand its Malaysian business, as well as providing support to clients there, alongside Singapore.
The move was largely driven by client demand, says Teresa Parker, head of Asia Pacific at Northern Trust. The firm is believed to have been in touch with state pensions such as civil servants' retirement fund KWAP and Employees Provident Fund (EPF) to discuss how it can provide support for asset management and globaly custody as these entities increasingly invest offshore.
Moreover, Parker expects the government-backed voluntary private retirement scheme (PRS), launched in July 2012, to fuel further growth in the local fund industry. The Malaysian government forecasts that the PRS will help the country’s private pension industry grow to RM73 billion ($22 billion) in assets by 2020.
Eight fund managers, – AIA Pension and Asset Management, AmInvestment, CIMB-Principal Asset Management, Hwang Investment Management, Kenanga Investors, Manulife Asset Management, Public Mutual and RHB Investment Management – have been approved to provide funds for the PRS.
“The PRS is an exciting development for the Malaysian market over the next five years,” says Parker. “As we see increasing pension contributions getting managed by local service providers, they also need to have a global custodian from whom they can get performance measurement, global custody and valuation reporting, as they invest these assets offshore.”
Northern Trust’s Asia-Pacific business is its fastest growing worldwide. Assets under custody in the region grew 26% annually from 2008 to $448.6 billion as of December 2013.
Rustam is the only employee in the office right now, but the headcount will expand further. She formerly worked in Bank Negara Malaysia’s external fund management division. She has also held various responsibilities in the risk management, investment operations and financial markets divisions since joining the central bank in 2001.
Meanwhile, Northern Trust will officially open its operations centre in Manila this year and is hiring to staff up the new office. The Manila centre will serve to bridge the time zone gap between the US and its Bangalore office so that fund accounting functions can be supported continuously across continents.
Northern Trust CEO Rick Waddell last year told AsianInvestor about the firm's plans in the Philippines, noting that the Manila presence would add to its operational and back-office team in India of over 3,000.
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 South Korean client base.
Waddell had also pointed to countries in Southeast Asia, such as Brunei and Malaysia, as places where it was starting to make headway 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 said at the time.
It would appear, then, that South Korea is high on the list of likely places for Northern Trust to open another office. Waddell had said that the firm was working with a specialist consultant on the ground and has its first institutional client using its asset servicing capabilities.