Northern Trust Casting Wider Net For Asset Management Customers

Northern Trust Corp., which built its institutional asset management business largely through cross-marketing to corporate and custody clients, has begun reeling in accounts from outside the bank.

In the first half of the year, Northern Trust Global Investments brought in $6.3 billion in new accounts from clients that include Austin Reed Group PLC and the state of Wyoming. Since then, Kimberly-Clark Corp. has signed on.

During the same period, assets under management for institutional clients rose 20%, to $161.9 billion, aided by strong returns on its equity and bond portfolios.

Emphasizing asset management services as the entry point for institutional customers is new for Northern.

In asset management, the Chicago-based banking company has been "more recognized on the personal side of our business," said Sheila A. Penrose, Northern's president of corporate and institutional services. Northern manages $66.8 billion of assets for individuals.

The changing focus shows how even established players are eager to snap up new business amid the boom in investment management, drawn by lucrative fees. Investment managers levy fees that typically total 0.722% of assets for money market investments and 1.444% for actively managed equity funds, according to Lipper Analytical Services, Summit, N.J.

Institutional clients-a category that includes pension and investment accounts for corporations, nonprofits, and state and local governments-are seen as particularly ripe for the picking.

Consolidation among asset managers is creating "heightened competition and a lot more activity in the institutional market," said Norman R. Lubin, chief executive officer of FMS Consulting, Blue Bell, Pa. "We're beginning to see the pendulum swinging back toward institutional business" after years spent pursuing affluent individuals.

To be sure, Northern is not turning away from its cross-selling strategy. That approach works for the bank and its customers because "we get to know more people within the client organization, which means better understanding their needs, which means serving them better," Ms. Penrose said.

Rather, she said, Northern saw an opportunity to pick up new business by leveraging its stability and service. She said Northern approaches the business with "a very clear focus and proven commitment," and said these are pluses "at a time when there is so much consolidation in the asset management and trust business."

Observers said a change is evident at Northern. "They have more capability and staff than they ever did in the asset management business and performance has been strong," said George H. Walper Jr., a consultant based in the Chicago office of Spectrem Group.

The arrival in February of Stephen B. Timbers as president of Northern Trust Global Investments helped to broaden the bank's outlook, executives said. Mr. Timbers, a former president of Zurich Kemper Investments, has a high profile and strong connections in the institutional market, they said.

He is also said to be a big believer in acquisitions. Stephen N. Potter, director of institutional marketing for Northern Trust Global Investments, said Mr. Timbers wants to beef up Northern's product line perhaps by acquiring a value equity manager to complement its growth equity capabilities. Northern's latest asset management deal closed Dec. 31. It bought an index equity funds shop with $28 billion under management from First Chicago NBD Corp.

Mr. Timbers could not be reached for comment.

Northern is intent on building an actively managed equity investment business, said Mr. Potter. Last year, most of the company's $12.7 billion of sales were in domestic fixed-income investments.

To help make inroads outside of Northern's existing clientele, Mr. Potter's sales force has expanded from 12 to 18 people since January 1997.

Among their duties is raising the company's profile among benefits consultants who advise institutional investors on selecting money managers. Some of the new accounts have come from such firms, including Buck Consultants, Watson Wyatt, and William M. Mercer Investment Consulting.

None of the accounts is massive, but they add up to substantial new assets. They include a $126 million pension fund for Kimberly- Clark's employees in the United Kingdom; $58 million from Boca Raton (Fla.) Community Hospital; $85 million from Austin Reed, a British retailer; $100 million in a bond index fund from the City of El Paso police and fire departments' pension plan; and $350 million from the State of Wyoming pension plan.

"We're very gratified by the recognition we're getting in the marketplace and particularly gratified that we are being selected on the basis of our asset management capability," Ms. Penrose said.

The bank is also burnishing its investment products image. Last month, its institutional mutual fund family dropped its former name, Benchmark Funds, in favor of Northern Trust Institutional Funds. (Its retail funds are the Northern Funds.)

Northern still faces some challenges. Fully half of its managed assets are short-term. In the more lucrative long-term asset management business, it is facing off against titans including Barclays Global Advisors, Mercury Asset Management, Standish Ayers, and State Street Global Advisors.

"That's very difficult for anybody to do," said W. Christopher Maxwell, an investment consultant in Rock Hall, Md. But, he added, "they certainly have the credibility to be a national player."

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