(Pictured:Wayne Bowers)
Northern Trust Global Investments has not had a lot of exposure to Australia, unlike its securities services sister company. But interest in the firm recently increased following its being awarded four mandates by New Zealand Superannuation Fund.
Wayne Bowers, Northern Trust’s international (non-US) CIO, says that international growth has been a focus over the past 10 years and he believes the firm has done a good job expanding in Asia, which still services the Australian market, although Northern’s securities servicing business has 86 people in Melbourne.
Bert Rebelo, the Hong Kong-based head of institutional business for the region, says he expects to be spending more time in Australia as interest increases. He attended the ASFA conference in Perth this month and is looking to sponsor one or two events in Australia next year.
Northern completed last year the build on its new equity trading platform based in Hong Kong, which is only its third in the world after London and the Chicago head office. This allows 24/6 trading.
Northern manages about US$850 billion globally, of which almost half is indexed and US$300 billion is in fixed interest. It has US$69 billion in active strategies and US$38 billion in a multi-manager offering.
Bowers says that Northern’s clients tend to be among the largest institutional investors, such as other sovereign wealth funds, central banks and big pension funds. “They are not so interested in brand awareness,” he says. “They are more interested in capabilities. We like to have people on the ground regularly but it doesn’t have to be all the time.”
Two trends among investors suit Northern’s core business: smart beta and ESG-aware investing. Smart beta is not new, although the name seems to have recently struck a chord with investors, following some disappointment with active management after the global crisis. Ironically, following the resurgence in markets last year, now is probably the time to renew the search for alpha. Nevertheless, according to a survey of 50 big investors around the world, undertaken by Northern Trust, 32 per cent already had some of their money managed to alternative indices, such as non-cap-weighted benchmarks.
Bowers says: “The big Nordic funds really led the way with alpha/beta separation about eight or nine years ago. That was a key alignment for us.” The firm this year launched an emerging markets equity fund with an ESG screen. It had to make its own index to do so.
The NZ Super mandates, which are also passive, are global large cap, global small cap, developed emerging markets and REITs. NZ Super, which necessarily has a high proportion of international investments, has almost two-thirds of it’s A$19 billion invested through index funds.
ESG is another forte for the firm but Bowers points out that individual preferences are important with ESG mandates. “For instance, we tend to focus on the ‘G’ (governance) with our emerging markets equities funds because that’s traditionally been seen as an issue in some countries … It needs to be locally relevant.”
According to Northern’s research almost 50 per cent of European funds now have ESG-aware mandates or integrate ESG principles across their portfolios. This compares with only 11 per cent in the US and 9 per cent through Asia. Bowers believes Australia is probably close to the European level of acceptance.
“We’re well suited to it because we produce risk-themed investment approaches,” he says. “And that’s for fixed interest as well as equities, both active and passive.”
