Investment Magazine
 

Northern Trust leverages Future Fund expertise

  • 8 May, 2012
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This is an archived article originally published on I&T News
“After Lehman Brothers and Madoff, investors want from their custodian financial strength, stability and integrity,” says Northern Trust's Steven Fradkin.

In 1993 Northern Trust’s Steven Fradkin was looking for office space in Sydney. He liked the potential growth of Australia’s mandated-pension-fund market, but wasn’t certain that custodians could meet the demands of Australian tax and foreign investment-fund reporting in a quality way.

“The market has always been attractive,” says Fradkin. “It is a more complex market because of the tax environment.”

Northern Trust decided not to open a Sydney office 19 years ago and would not have an Australian office until 2007, when it snagged perhaps the most prestigious custody account in the country: managing the back-office operations of the $77-billion Future Fund.

“They can fire us at will,” says Fradkin, who, as president of corporate and institutional services at Northern Trust, holds quarterly conference calls with the Future Fund and if any problems arise is on the phone with the Melbourne-based fund.

The Chicago-based company handles the custody business of four other Asia-Pacific sovereign wealth funds and seven central banks. In Australia it has $120 billion in assets under custody with clients including Queensland Investment Corporation and Commonwealth Superannuation Corporation.

“The best thing for our long-term growth is doing a good job for our current clients,” says Fradkin. “We don’t need to win all the contracts, just some of them.”

About 80 people in Australia work for Northern Trust in Melbourne and the company is looking to hire more amid an Australian expansion it characterises as “controlled, organic growth.”

“We’re still looking for local talent to increase our capability,” says Rohan Singh, country head of Northern Trust in Australia.

Bangalore, London and Chicago help serve Australian asset managers’ custody needs, which are now global in scale. Investors want to see – at the push of a button – their exposure to the derivatives, cash, foreign exchange, stocks and bond markets in real time, says Singh.

They also want their custodian, he says, to give them a total risk perspective as well as scenario testing to ensure they are not exposed to uncalculated risk.

“Investors want someone who can keep their investments warm, safe and dry,” says Fradkin, a 27-year Northern Trust veteran who has been to Australia as many as 15 times.

“The industry has consolidated down to a small number of players,” he says. “After Lehman Brothers and Madoff, investors want from their custodian financial strength, stability and integrity.”

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