CHICAGO - Mutual funds haven't always been a major focus at Northern Trust Global Investments, but recent activity at the firm indicates that might be changing.
With $333 billion in assets under management, including $231 billion in institutional assets as of June 30, Chicago-based NTGI is among the leading U.S. money managers. However, in the mutual fund business it has been a second-tier player with $38 billion in assets. NTGI had $22 billion in retail mutual fund assets and $16 billion in institutional mutual fund assets as of Aug. 31.
In mutual fund assets managed for defined contribution plans, Northern Trust didn't crack the top 25 in 1999, according to Pensions & Investments data (April 17).
But the firm has made changes that might improve its position in the mutual fund and investment management areas:
* In the past 11 months, NTGI launched five new funds that go beyond core offerings, ranging from midcap growth to global communications to large-cap value.
* Before the end of the year, NTGI plans to unveil two more funds: the multicap Northern Trust Growth Opportunities Fund; and a concentrated growth fund that invests in blue-chip stocks.
* In September, NTGI hired Eric Schweitzer, a former managing director of mutual funds at US Bancorp, Minneapolis, for the new position of director of mutual fund distribution, product management and client services.
* In August, NTGI hired a new chief investment officer, Orie Dudley, the former CIO at Scottish Widows Investment Management Ltd., Edinburgh.
* Also in August, NTGI hired a team of six active international equity managers from Julius Baer Investments Ltd., London, led by Andrew Parry, who was head of global equities at Julius Baer. Mr. Parry now heads the international equity team at NTGI and is the CIO of the firm's new European division.
* In May, NTGI acquired Carl Domino Associates LP, a West Palm Beach, Fla.-based value manager. One month later it launched the Northern Large-Cap Value Fund, subadvised by Domino.
A majority of Northern Trust's assets under management are from separate accounts, while mutual funds historically have played second fiddle. But Steven Timbers, president of NTGI, said the firm is looking to increase the mutual fund business. Mutual fund assets at NTGI climbed to $32.9 billion at year-end 1999 from $20.8 billion a year earlier, according to P&I data.
He attributed part of the increase to strong performance. Among the top performers are the Northern Midcap Growth Fund, which returned 90.2% in 1999 and was up 7.9% this year through Aug. 31; the Northern Institutional Diversified Growth Fund, up 13.5% this year through Aug. 31 and with a five-year annualized return of 23.6% through Aug. 31; and the Northern Institutional Focused Growth Fund, which was up 15.9% this year through Aug. 31 and had a five-year annualized return of 26.5% through that date.
He also said distribution through new channels, such as mutual fund supermarkets offered by Charles Schwab & Co. Inc, San Francisco, and Fidelity Investments Inc., Boston, have helped boost sales. Sales through mutual fund supermarkets are about $300 million year-to-date, up from virtually nothing two years ago, said Mr. Timbers.
The mutual fund strategy has involved rounding out the product line beyond core offerings. On Dec. 31, NTGI rolled out two new growth funds: a small-cap fund and a midcap. In August, NTGI came out with a sector fund, the Northern Global Communications Fund. In May, the firm launched the large-cap value fund, which helped NTGI fill a void in its investment management capabilities, said Mr. Timbers.
Mr. Parry and his team of equity managers from Julius Baer helped fill a gap on NTGI's international side, said Mr. Timbers. The team will work to develop more global and international funds, including those that focus on a particular sector or region, he said.
Mr. Timbers said Northern may acquire more firms that can bring more investment capabilities or open up new distribution channels.
Product distribution will be one of Mr. Schweitzer's primary tasks. A market he'd like to crack is defined contribution, which has been the source of tremendous growth for other mutual fund firms. NTGI already has a strong presence as a custodian in the defined contribution market, but he would like to extend that strong presence into investment management. "This organization has always been known for record keeping, while investment management is sometimes seen as secondary. We're going to challenge that," said Mr. Schweitzer.
To improve distribution, he said, NTGI wants to take full advantage of existing internal resources and the Internet, and continue to develop external distribution channels to find new markets for the funds.
Lloyd Wennlund, managing director of mutual funds at NTGI, would like to see the firm break into the top 25 in terms of mutual fund assets under management. "We've had some great investment performance," he said, "but we haven't done a great job telling our story."