Northern Trust Corp.'s investment management business plans to expand by adding product capabilities domestically while opening more offices in international markets, according to the group's new top executive.
Stephen N. Potter, the president of Northern Trust Global Investments, said that the Chicago company plans to launch a proprietary exchange-traded fund family, which will be called Northern Exchange Traded Securities, in the United States this month and he hopes to add more offices regionally in the Middle East, Asia, and Australia.
The overall strategy domestically is for Northern Trust to offer additional products and services through third party distributors for individual and institutional investors.
Northern Trust has introduced new socially responsible investment products and a real estate investment trust platform, and it plans to roll out a series of defined-contribution retirement products this year.
"We are building a bunch of new categories of investment-oriented products here for our customers," Mr. Potter said Tuesday in an interview from London. "This really takes us into another area of focus. We are working to build more third-party distribution outside of Northern Trust's existing client base. I think this can be a major opportunity on a global basis."
Mr. Potter, 51, was promoted to his new position last week and will be moving from London to Chicago.
He succeeded Frederick H. Waddell, who was named Northern Trust's president and chief executive in January.
On Thursday, Northern Trust announced the promotions of two executives to Mr. Potter's old jobs: Wayne Bowers, to CEO of Northern Trust Global Investments Ltd., the London subsidiary that Mr. Potter ran, and Biff Bowman to head of the Europe, Middle East, and Africa region.
On Tuesday, Northern Trust received approval from the Central Bank of the United Arab Emirates to open an office in Abu Dhabi that will offer asset management and asset servicing. It will be the company's first Middle East office, though it has been serving investment clients in the region for more than 20 years.
"We want to expand our client base in the Middle East, in the Asian Pacific region, including China, and we want to open an office in Australia," Mr. Potter said. "We want to develop a much bigger footprint with a much more meaningful presence globally."
Most financial services companies, including the other large custody banks that compete with Northern Trust, have made international expansion a major component of their growth strategies in the past year.
State Street Corp. said it wants at least half of its business to come from international markets so that it can truly consider itself an international custodian. The Boston company's international business accounted for 41% of its revenue last year, versus 39% in 2006.
Last year non-U.S. clients accounted for 36% of revenue at Bank of New York Mellon Corp.'s BNY Mellon Asset Management. That included 40% growth in revenue in the fourth quarter.
Northern Trust's international assets under custody have increased an average of 30% a year for 15 years, but in 2007 the increase was 50%.
Thirty percent of Northern Trust's employees and 52% of its $4.1 trillion of assets under custody are outside the United States, where it has 85 offices in 15 states.
Mr. Potter said that he gained valuable insight into global opportunities working in London the past seven years as Northern Trust's head of the Europe, Middle East, and Africa region, chairman of Northern Trust Global Investments Ltd., and chairman and CEO of Northern Trust Global Services Ltd.
Northern Trust, which has offices in London, Tokyo, Hong Kong, and Singapore, is gaining new business in international regions where it has no local offices, Mr. Potter said including new institutional business in Sweden. The Swedish business is managing two quantitative index portfolios worth about $3 billion.
Despite the overseas push and the effort to expand product offerings and third-party distribution domestically, Mr. Potter said that the "best short-term opportunity for Northern Trust is to continue to do more and more with existing clients."
He said he wants his unit to do more cross-selling with the parent company's corporate and institutional services groups.
"We have always had a high ratio of cross-selling when it comes to our existing clients, but there are certainly other avenues of growth for us right in Northern Trust," he said.
Northern Trust has always had a strong asset management business, accordin to Mr. Potter.
Last year its assets under management increased 9%, to $757.2 billion, and revenue growth attributed to the company's asset management business was "considerably higher," he said.
Mr. Potter said that he is "optimistic" that these growth initiatives can help Northern Trust maintain double-digit growth both this year and over the next three to five years.
"We are in a position where we really need to just leverage off of the existing strengths in this business, while we examine new means for growth both domestically and in foreign markets," according to Mr. Potter.
Northern Trust is currently the third-largest institutional quantitative investment manager globally. It is trying to bulk up in that line of business as well. At the end of last year it had $250 billion of assets under management in the category.
"This is certainly a major thrust for us," Mr. Potter said.
"In the end, everyone wants to get more assets from high-net-worth individuals and sophisticated investors worldwide," he said. "We think that we have the solutions and we are developing the distribution to get to these customers whether they live in Asia, the Middle East, Europe, or in the United States. We want to find innovative ways to add to our client base."
