In Northern Trust's third-quarter earnings call, chief financial officer Bill Morrison attributed the majority of the 2% global year-on-year headcount increase to demand in Asia-Pacific. In the last 18 months, notable hires have included Kevin Hardy as regional investments head and Michael Wu as chief representative to China.
But the Chicago-based custodian and service provider's most notable recent appointment was Teresa Parker's promotion to Asia-Pacific chief executive in August. She took up the role, her first in the region, on October 31 following the retirement of Gregg Behrens.
Parker was previously head of client servicing for Europe, the Middle East and Africa (EMEA) at Northern Trust. Her past roles include chief operating officer for EMEA. She has been with the firm since 1982.
You were recently appointed chief executive, how are things going?
It's going well. Asia-Pacific is at the front of the recovery -- it feels very positive relative to other parts of the world, and that's great for business.
I've spent a great deal of time with Northern Trust clients and prospects since arriving in the region, and it's clear that people are thinking through new ways to do things. Coming on the scene at this point, I'm seeing a lot of opportunity.
Your background is mostly in Europe. How are you finding Asia?
The clients are very similar, particularly in terms of how sophisticated their needs are. Where the money is coming from in Asia is slightly different, but the clients are equally sophisticated in their attention to challenges and opportunities around risk, improved reporting and making sure assets are safeguarded appropriately.
I've been doing a lot of research on Asia and I've heard it said that 'the business of Asia is business'. You really do get that feeling. There's a keen commercial focus here. That's not to say Europe isn't commercial, but in Asia we seem to live, breathe and constantly come up with new thinking on ways to do business.
What are your goals for Northern Trust's Asia-Pacific business?
The key for us is sticking to strategy. We have a focus on sovereign wealth funds, central banks and other government entities -- about 95% of the assets we custody are with those organisations. We want to continue to grow that segment and expand relationships with other institutional segments where we have global expertise to offer from our work around the world.
Our current growth rate is very high. In the first nine months of this year, we've increased our Asia-Pacific assets under custody by about 70% and our assets under management by about 40%. I hope to maintain a growth rate of about 30% per year. This is something we can do by bringing in clients organically, looking after our current clients and expanding our products in alignment with their needs.
Do you have a specific strategy for attracting additional business?
A key area I'm looking at is servicing of asset managers and insurance companies. We do this in both Europe and North America, and we do it extremely well. We already have the products; it's just a matter of bringing them to this region and setting up the infrastructures that best suit.
We are getting to know the insurance segment in this region well. Our current product suite works for them, and we are determining the kind of accounting capabilities they need.
Northern Trust has a lot of well known clients in Australia and New Zealand. Can we interpret this to mean that your regional client base is concentrated in those countries?
We do have some terrific clients In Australia and New Zealand that are publicly known, and we have clients across the rest of Asia that prefer absolute confidentiality.
We're dealing with a high proportion of central banks throughout the region -- about 40% of them -- and more than 30% of the sovereign wealth funds in the region. It is a much more diverse picture than it would appear above the surface because of client preferences.
What opportunities do you see in asset management and asset servicing in Asia-Pacific?
In asset management, there are great opportunities in areas where we are very strong: fixed income, index management or quant management, transition management and manager-of-manager [investments].
We've done particularly well in the indexing space because of the shift a lot of clients are making from active management to indexing management. We've got some strong capabilities that sovereign wealth funds particularly like in terms of how we are able to customise the indexes and the benchmarks for them.
In asset servicing, we see tremendous opportunity to bring the benefit of our global expertise in servicing asset managers and insurance companies to clients in the region.
What new asset management and asset-servicing products does Northern Trust have in the works for Asia?
In our Australia franchise, we're focusing on local-investment accounting solutions that will unleash the benefit of our global platform to superannuation funds. We see a lot of providers in that market with Australia-only solutions, and this capability will enable us to open up global capabilities to the local market.
Innovation in risk management reporting is another area I would highlight. This is something all our clients around the world are focused on post-financial crisis -- everything from improved counterparty exposure reporting to stress testing and the ability to do various scenario analyses on your portfolio.
In asset management, there is an increased roll-out of transition management. We have a good practice in North America and Europe, and we are starting to talk to clients about transition management in this region.
I was under the impression that the company already offered transition management in the region. What do you mean when you say the firm is rolling out the offering in Asia?
We are ramping up. We've had Simon Hutchinson, our global head of transition management, out talking to a lot of our clients about this -- what effective transition management offers, educating clients and prospects on why they might want to use a transition manager. We were fairly low-key and opportunistic in our transition management offering before.
Can we expect any transition management executives to be relocated to the region?
I think that could be a next step for us. Our Asia-Pacific team is working closely with our London-based team right now, but we will be thinking about doing transition management from the region at some point.
What's your near-term outlook for asset management and asset servicing in Asia-Pacific?
It's very positive. People have gotten through thinking about the financial crisis, and we are focused on helping clients move forward with decisions being made. That creates opportunities. There is still a certain amount of caution to make sure the lessons learned from the crisis are not lost, but the feeling is quite optimistic.