Northern Trust Corp.’s product and distribution expansion in recent months helped it generate double-digit growth in assets under management.
But the benefits of that growth were undermined in the third quarter by a difficult foreign exchange market that caused the Chicago company’s profits to decline.
Northern Trust announced Wednesday that its third-quarter revenue fell 5.4% from the second quarter, to $749.6 million, largely because of a drop in foreign exchange income. Earnings fell 3%, to $163.7 million.
However, total assets under management, rose 10% from a year earlier, to $667 billion. During the quarter Northern Trust generated $63.5 million of asset management fees.
Net income grew 10.8% to $163.7 million, or 74 cents per share, from a year ago. Analysts polled by Thomson First Call expected the company to post higher earnings of 76 cents per share.
Peter Jacobs, who joined the company in May of last year as the senior product manager for mutual funds and managed accounts, said it has added six funds in the past nine months and has started distributing its separately managed accounts through a large, national broker-dealer.
Net income grew 10.8% to $163.7 million, or 74 cents per share, from a year ago. Analysts polled by Thomson First Call expected the company to post higher earnings of 76 cents per share. Northern Trust’s stock declined 1.64% Wednesday to $59.56 a share.
As of Sept. 30 the company had 58 mutual funds with $62 billion of assets under management.
This summer its funds were added to Morgan Stanley’s mutual fund wrap program, and its separate accounts were added to the fiduciary services platform of Citigroup Inc.’s Smith Barney Inc.
Mr. Jacobs, who joined Northern Trust from Deutsche Asset Management to boost distribution of mutual funds and managed accounts, said his company has been adding marketing personnel and working to get Smith Barney’s sales force up to speed on its accounts.
Northern Trust has been working to gain third-party distribution for its separately managed accounts, and the deal with Smith Barney is a coup in that regard, he said. Of the six third-party distributors of Northern Trust’s separate accounts, Smith Barney is the biggest, he said.
“We hope next year to get at least a couple hundred million” dollars of investments from the relationship, he said.
In June his company announced that it had created three multimanager equity funds intended to provide more “open architecture” choices to its clients. Mr. Jacobs said the funds, which were launched with $300 million of assets under management, now have more $900 million and are attracting about $10 million a day.
The Northern Multi-Manager Small Cap Fund uses four subadvisers and targets stocks of companies that are similar in market capitalization to companies in the Russell 2,000 Index. The Northern Multi-Manager Mid Cap Fund is managed by three subadvisers and invests in midcap firms like those in the Russell Midcap Index. The Northern Multi-Manager International Equity Fund focuses on foreign companies.
In most cases, the funds’ managers are available to Northern Trust’s institutional investors. Northern Trust’s no-load family now has 36 funds.
Mr. Jacobs said the three newest funds “respond to the overall demand for open architecture and the fact that increasingly sophisticated clients and advisers are looking for nonproprietary product.”
By doing the legwork of teaming up complementary fund managers, Northern Trust seeks to provide the benefit of open architecture without its bewilderment, he said.
“We feel that open architecture leaves a lot of investors dazed and confused,” Mr. Jacobs said.
