Northern Trust weighs China options

The investment management arm is talking to potential partners.

Northern Trust Global Investments (NTGI) is considering a partnership in China as part of its strategy for regional expansion, says Barry Sagraves, London-based CEO responsible for all markets outside of North America.

The firm's affiliated custody bank has a long history in Asia, while the global investment side has just established an office in Hong Kong under Thomas Benzmiller, who arrived in March from Chicago; plus an existing business in Japan under Kunihiko Nakao. NTGI specializes in products such as manager-of-manager programmes, enhanced cash and enhanced passive portfolios.

"We're not trying to have one client for each country," Sagraves says. "We're focusing on markets with big assets under management, a large institutional sector and that are growing or changing." For now that means emphasizing Hong Kong, Singapore, Japan and China, starting with existing clients of Northern Trust's custody and securities lending businesses.

The firm is considering establishing a rep office in Beijing (the custody bank recently opened one there), to help it understand the market and identify potential partners. Benzmiller is also tasked with talking with various organizations in China that may have the right distribution power and a desire to team up with NTGI, perhaps in a joint venture, or in a looser arrangement.

"We look for a potential partner's business imperative," Sagraves says, as well as personal chemistry, reputation and risk controls.

NTGI believes it has a suite of products and services that can meet current demand for cash-plus strategies, given the rise of short-term interest rates and the desire by many institutions to put their cash to work.

Sagraves is somewhat familiar with Asia, having helped Martin Currie's Chris Ruffle establish that firm's China JV from Edinburgh. Sagraves joined NTGI two years ago.

The firm has JV experience in Europe, particularly in Germany, where it has one with Helaba Landesbank to manage and distribute European credit and US high yield products. It also has a series of distribution partnerships in the United Kingdom targeting various market segments for its manager-of-managers service.

Another task of Benzmiller's will be to market the firm's Dublin-listed range of passive, cash and multi-manager funds to Asian clients, on a private basis.

Although Northern Trust Global Investments is a newcomer to the region, it believes it can readily distinguish itself because there are fewer competitors in the niche areas it works in. For example, in multi-management, it will be taking on the more established businesses of Russell Global Investors and SEI. Sagraves says the three players' ways of selecting and monitoring portfolio managers are distinct, with Russell focused on research, SEI on quantitative methods and NTGI pursuing a blend. The different emphases meet different needs, so there should be a natural market for NTGI's multi-manager product, he believes.

Benzmiller is also studying whether the firm should establish a local desk for investment management for its cash and passive products, now run from London and Chicago, and whether that would prove a significant comfort to Asia-based clients. This follows on the recent set up of an investment team in Japan, to handle some of the passive mandates from Japanese clients previously managed entirely in Chicago.