Northern Trust has lifted the pace with new technology for its asset servicing clients with the purchase last week of another FX specialist company. But, Penelope Biggs says there is more to the future than just having good technology. Culture is probably the most important thing.
London-based Biggs, Northern’s chief strategy officer for corporate and institutional services, was in Australia last week for a series of meetings across a range of areas, which suits her broad field of remit. Her role includes global business strategy, marketing, risk management, market expansion, product development and strategic partnerships.
Northern Trust spends about US$2.5 billion on technology over rolling two-year periods, Biggs says, so clearly the firm recognises its importance. This goes on not only the development of new platforms and innovations, such as the use of distributed ledger technology (blockchain), digital assets and artificial intelligence, but also on cyber security and business-as-usual investment, including the integration and deployment of new acquisitions.
Northern went live with its first blockchain client last year – a private equity manager domiciled in Guernsey. At the same time they announced a number of patents for their leadership in the private equity digital asset space and this year processed the first live capital call using distributed ledger technology for Emerald Cleantech Fund III LP.
Northern has been working on the evolution of its advanced data, technology and operating model – ‘designed together as one’ – and delivered through a new platform called “Matrix”. This is an ambitious scheme which will see the delivery of “dynamic data” and digital solutions to handle all the data requirements for clients globally.
“Matrix is taking our asset servicing capabilities to a whole new level,” Biggs says. “This architecture will ultimately serve more than 2,500 clients around the world, with more than US$10 trillion of investments. It is no small undertaking but we are committed to putting intelligent, relevant data insights and predictive capabilities at our client’s fingertips, empowering them to make smarter and more timely investment decisions.”
While she does not profess to be an expert in technology, Biggs says that different clients globally want different solutions, configured in various ways, so the firm tries to keep an open architecture approach to all its new developments. “We are good at providing flexibility and optionality,” she says. “We don’t want to push people into certain directions.”
The firm’s latest foreign exchange acquisition, announced last week, is an example of this desire to provide solutions rather than deliver products. Northern said it would acquire BEx LLC, a provider of FX software with which it has had a relationship since 2016. The two companies are both headquartered in Chicago. The acquisition follows, and complements, the strategic partnership with Lumint from mid-year. Lumint is a boutique currency technology specialist based in Boston.
“The way we are configuring our strategic architecture makes it quicker and easier for us to incorporate advanced new technologies and deploy smart AI solutions,” Biggs says. The use of a technology known as Kafka (a dream of utopia) in the building of Matrix is an example. Northern’s latest private equity blockchain initiative was deployed using Kafka technology within their Matrix platform.
Angelo Calvitto, the country executive for Australia, says: “It’s not so much about providing customisation, it’s more like providing flexibility with scale. When we build something our aim is to be able to redeploy it for the benefit of all our clients.”
Northern Trust ratified its next global five-year plan at a board meeting in November, following its presentation in July. Regional and country heads, such as Calvitto for Australia and New Zealand, then met late last month in Singapore to agree specifics that would drive the future growth of their business across the APAC region – for example the launch of their innovative Integrated Trading Solutions capabilities across Australia, Singapore and Hong Kong early next year.
She emphasises the integrated and collaborative nature of the firm, for which she has worked for about 23 years, and also its history of conservativism and integrity. That’s the importance of “culture”. It has US$10.8 trillion under custody and administration and US$1.2 trillion in assets under management. It has a wealth management business with US$295.5 billion under management
The firm has been particularly successful in Australia and New Zealand and has plans to lift its presence throughout the rest of the Asia Pacific, which tends to be a bit more nuanced because of the different dynamics throughout that part of the region. Asia is less homogenous than many people think.
The firm’s first two asset servicing clients in Australasia were NZ Super followed by the Future Fund, which, combined, enabled it to establish what is now a large office in Melbourne followed by another in Sydney. In total they now have 150 staff in the Australia, with 40 clients across the region, offering a range of innovative asset servicing capabilities.
As recently reported, but still to be formally announced, Northern Trust has won the key big new asset servicing client QSuper away from incumbent State Street, which is expected to transition in the second half of next year. Neither QSuper nor Northern Trust have yet commented on the deal.
Greg Bright is publisher of Investor Strategy News (Australia)