Cleveland, with its struggling economy, might not seem the best place for high-end investment management.
But it is also home to some banks hit hard by the credit crisis. And that could help make Northern Trust Corp.'s recently announced deal for Lakepoint Investment Partners LLC pay off, said Sherry Barrat, the president of Northern's personal financial services unit.
Without mentioning any companies, she said the fact that "other major players in town are under duress" could work to Northern's advantage by putting wealth management clients in play. "I won't say we targeted Cleveland because of the disruption in that market," she said, "but that disruption is fortuitous in a way."
Northern Trust said it would double the assets under management in its Cleveland office, its sole outpost in Ohio, by adding Lakepoint's $586 million.
Rus Prince, an analyst at Prince & Associates in Shelton, Conn., sees a chance for Northern to win business in the region from rivals whose brands have been tainted by the mortgage meltdown, including both banks and big-name brokerage houses. "You are going to see more and more of the brand-name institutions losing their cachet because of the problems they are facing," he said. "It is a very good time for boutiques or premier players that have not been having problems to take advantage."
National City Corp. was one bank hit hard by the credit crisis, but a spokeswoman for the bank said its private-client group is "confident in our position of strength in the wealth management area," she said. "We're growing in all of our markets, including Cleveland, and have achieved record revenue, sales, [and] asset and client retention levels over the same time last year," she said.
The deal for Lakepoint, announced June 26, is expected to close Sept. 30. Its seven-member staff is to be integrated into Northern's Cleveland office. "We see our ability to grow in Ohio as very good," Ms. Barrat said.
The deal is in line with the acquisition roadmap laid out this year by Northern Trust chief executive Frederick H. "Rick" Waddell. He said in January that he would use small acquisitions to grow within the United States and open offices to expand abroad.
Lakepoint develops client portfolios from large-cap growth stocks and investment-grade, fixed-income securities, which fits with Northern's approach, Ms. Barrat said.
Assets in Northern's personal financial services unit are most sizable in Illinois, Florida, and California, which together accounted for $81.2 billion at Dec. 31. Arizona and Texas accounted for another $10.3 billion, and 13 other states had a combined $26.9 billion.
Northern has not been an active buyer of wealth managers. Its previous acquisition, of Atlanta's Legacy South Inc., which had $300 million of assets, came six years ago. It will look for more deals, particularly in the 11 states where it has only one office, Ms. Barrat said. "We have decided that the right kind of acquisitions, small ones in markets like Ohio, if they have the right people and clients, can make sense to help us build our base more quickly." She said it will be "deliberately opportunistic." "We don't intend to become some huge serial acquirer," she said. "Our strategy remains organic growth."
"Families are realizing that having their own family office is pretty expensive," she said. "So there is a greater realization that you can get most of what a family office provides by going to other providers," like Northern Trust, which is counting in part on organic growth to come from additional family office business. It plans to market the service to families with as little as $50 million of assets, she said. The service is most widely used by clients with $200 million and up.
The company has sold these services for the lower segment on an ad hoc basis in the past but will start actively marketing them this summer, Ms. Barrat said.
