Northern Trust unit focuses on fund sales

Mutual funds haven’t always been a major focus at Northern Trust Global Investments, but recent activity at the Chicago company indicates that that may be changing.

With $333 billion in assets under management, including $231 billion in institutional assets as of June 30, Northern Trust is among the leading U.S. money managers. However, in the mutual fund business Northern Trust has been a second-tier player, with about $38 billion in assets.

NTGI had about $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 data from sister publication Pensions & Investments.

But in the past year, the company made a number of moves 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 mid-cap growth, to global communications, to large-cap value.

* Before the end of the year, the firm is planning to unveil two more funds.

The next offering, which will be available this month, is the multi-cap Northern Trust Growth Opportunities Fund. The firm is also slated to introduce by yearend a concentrated growth fund that invests in blue-chip stocks.

* In September, the company hired Eric Schweitzer, a former managing director of mutual funds at U.S. Bancorp in 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 chief investment officer at Scottish Widows Investment Management Ltd. in Edinburgh.

* Also in August, the firm hired a team of six active international equity managers from Julius Baer Investments Ltd. in London, led by Andrew Parry, who was head of global equities. Mr. Parry now heads the international equity team and is the chief investment officer of the firm’s new European division.

* In May, NTGI acquired value manager Carl Domino Associates LP, based in West Palm Beach, Fla. One month later, Northern launched the Northern Large-Cap Value Fund, subadvised by Domino.

A majority of Northern Trust’s $333 billion assets under management are from separate accounts, while mutual funds historically have played second fiddle. But Steven Timbers, president of NTGI, says the bank is now looking to increase the mutual fund side of the business. In the past two years, growth in mutual fund assets at the company has been significant, climbing to $32.9 billion at yearend 1999, from $20.8 billion a year earlier, according to P&I data.

Mr. Timbers attributes part of the increase to strong fund 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 Aug. 31.

He also says distribution through new channels, such as mutual fund supermarkets offered by Charles Schwab & Co. in San Francisco and Fidelity Investments in Boston, have helped boost sales. Mutual fund sales through fund supermarkets are about $300 million year-to-date, up from virtually nothing two years ago, says Mr. Timbers.

This year, 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 mid-cap. In August, the firm came out with a sector fund – the Northern Global Communications Fund. In May, it launched the Domino-advised large-cap value fund, which helped it fill a void in its investment management capabilities, says Mr. Timbers.

The hiring of Mr. Parry and his team of equity managers from Julius Baer has helped fill a gap on the international side, says Mr. Timbers.

The new international equity team will work to develop more global and international funds, including those that focus on a particular sector or region, he says.

Mr. Timbers says Northern Trust may acquire more companies if it can bring NTGI more investment capabilities or could open up new distribution channels. “We’d probably be more interested in a firm that might open up new channels of distribution for us,” says Mr. Timbers.