From NTGI’s perspective, he’s got a point. When Mr Potter took the role as head of its Emea business at the start of the decade, assets under management out of the UK office weren’t anyway near the $90bn of today, and there were far fewer than the 1500 staff currently working at the London base. “The city has leveraged its global capability and seen the dynamic emergence of private equity, derivatives, and other products since my time here. It’s also now the doorstep to the emerging markets,” he adds.
The company’s liability-driven investment (LDI) suite of products was developed out of the London subsidiary and has since gone on to capture significant institutional money globally, not just in Europe. He says: “I would even go on to say that NTGI’s Emea hub has the potential to manage $800bn by 2018, so equivalent to Northern’s total assets worldwide today.”
Optimistic outlook
Assets under management rose 9 per cent last year for the global investment business and Mr Potter is confident this rate of growth can be matched and possibly bettered in the next 3-5 years.
This is a crucial period for NTGI and of course Mr Potter, who succeeds Frederick “Rick” Waddell, now CEO of the Northern Trust brand and its $4100bn in assets under custody.
Its generally conservative business model, independence, and the perception that it is a ‘safe haven’ player means it is well-placed to withstand ongoing dislocation in the financial markets.
He explains: “We do proportionally better in down markets because of our set up: Our business model is focused on risk management and the delivery of information to clients and our investment products do what they say they do on the tin”.
The new chief believes NTGI’s $281bn quants business, $60bn active equity, $400bn in active fixed-income strategies, and its $40bn multi-manager platform, as sturdy product lines should a market tumble suddenly become a more serious fall.
“My priority is to ensure we have expertise and leverage off all areas. For example we have a renowned expert to guide our quant active products on to a new level and launching products all the time,” says Mr Potter.
The ‘expert’ is Stephen Schoenfeld, head of investment strategy for the global quant manager business, and reckoned to be one of the key drivers behind recent business wins in the Middle East (“a really good source of opportunity for us”). Having platforms in New York, London, Tokyo, and of course Chicago, also helps the quest to add assets and boost fees.
ETFs and offshore delivery
Described by CEO Rick Waddell as a “breakout initiative for us”, the launch last month of six ETF products in the US, which saw Mr Potter ring the opening bell at the NYSE (“you might catch me on CNN,” he jokes) is a first for NTGI but unlikely to be its last. “We have registered several other ETFs to be launched in the coming months,” he says, with US retail and institutional investors the target audience and with exposure to indices including the Hang Seng and the FTSE 100.
The end of 2007 saw six pension plans and two foundations sign up for Northern’s Investor Program Solutions (IPS) product, where asset allocation, manager selection/review and corporate governance are all outsourced to Northern Trust Global Advisors (NTGA), the company’s multi-manager business. In the first quarter of 2008, five names have been added, with about $5bn of assets committed to IPS.
Around half of total revenues are now derived from offshore units, a pattern which has seen NTGI establish a base in Melbourne recently. It has also joined the scramble for pension money in China (pending the go-ahead for a QDII licence), and the Central Bank of the UAE has just approved an asset management and servicing licence for an office in Abu Dhabi.
“We will participate actively in the development of capital markets and pension investment structures in these markets, and in five years we’ll have a lot more assets there. Whether in Singapore or Nebraska, it is important to deliver excellence in execution, and aim for long-term wealth and capital preservation for our clients.”
And a flavour of what’s to come from NTGI belies its conservative streak. This year we can expect the addition of high alpha boutiques to its multi-manager platform, more ETFs, and new product and third-party distribution solutions for its wealth management business. It currently manages around 20 per cent of the Forbes 400.
CV
Steve Potter
BA degree in economics and history, Duke University, and MBA degree from JL Kellogg graduate School of Management, Northwestern University.
1982
Joins Northern Trust. Roles included managing director of the Institutional Group within Northern Trust Global Investments, where he was responsible for its investment business with corporations, endowments, foundations, insurance companies, union and public pension funds.
2001
CEO of EMEA at Northern Trust, based in London.
2008
President and chairman of Northern Trust Global Investments, based in Chicago. He also serves as chairman and CEO of Northern Trust Global Services. He sits on the corporation’s management group.
