CORPORATE & INSTITUTIONAL

Transcription

1 Investor Day 2005 Northern Trust Strategic Differentiation CORPORATE & INSTITUTIONAL SERVICES Rick Waddell President Today s Agenda C&IS Strategic Profile Competitive Differentiators Focus Client Service Innovation Technology Client Outsourcing from the C&IS Perspective Summary and Q&A Corporate Northern Trust PAGE 2 & Institutional Services 1

2 CORPORATE & INSTITUTIONAL S E R V I C E S M I S S I O N To deliver superior asset servicing, fund administration, investment management and advisory services to institutional investors worldwide, through the application of innovative technology and a strong emphasis on client satisfaction. Positioned for Success and Profitability Asset Management Risk Management Information Services Cash Active Passive Securities Lending Attribution Analysis Value at Risk Cross-Border Pension Pooling Accounting Reporting Valuation Manager of Managers Foreign Exchange Transition Management Commission Recapture Compliance Monitoring Market Event Analytics Rates of Return Services Multinational HQ Reporting Asset Servicing Safekeeping Income Collection Settlement Corporate Actions Investment Operations Outsourcing Northern Trust PAGE 4 2

3 Positioned to Attract Global Opportunities 16 Locations Worldwide Staff Outside U.S.: 1,750+ FTE Clients in 39 Countries Trade Settlement ~90 Markets Toronto Chicago Isle of Man Dublin London Luxembourg Beijing Tokyo San Francisco Los Angeles Detroit Guernsey Jersey New York Hong Kong Singapore Northern Trust PAGE 5 Compelling Performance in Our Target Segments 25% - 38% Across Target Segments Top 200 U.S. Pension s Top 100 U.S. Public s Top 25 Taft- Hartley Plans U.K. Local Authority Market 34% 31% 32% 28% Top 100 U.S. Corporate Plans Top 50 U.S. Foundations Top 50 U.S. Endowments Top 200 U.K. Pension s 38% 32% 28% 25% Sources: Pensions & Investments, Investment & Pensions Europe, Pension s & Their Advisors, S&P Money Market Directory, Nelson Marketplace, and WM Company Local Authority Pension Universe Northern Trust PAGE Corporate 6 & Institutional Services 3

4 Sustained in stark contrast to equity markets $3.0 $2.5 Assets Under Custody $2.41 Trillion (Record) $1.2 $1.0 Global Custody Assets $1.0 Trillion (Record) Assets Under Management $478 Billion $500 (Record) $400 $2.0 $0.8 $300 $1.5 $0.6 $1.0 $0.4 $200 $0.5 $0.2 $100 $ Q05 $ Q05 $ Q05 CAGR: +12% CAGR: +26% CAGR: +19% CAGR: Northern Trust Dow Jones: -1% S&P 500: -3% NASDAQ: -5% EAFE: 0% PAGE 7 Achieving Objectives through differentiation Competitive Differentiators Focus Client Service Innovation Technology Differentiators Fuel FSG Acquisition Global Managers International Northern Trust PAGE 8 4

5 Achieving Objectives through differentiation Competitive Differentiators Focus Client Service Innovation Technology Differentiators Fuel FSG Acquisition Global Managers International Northern Trust PAGE 9 Exclusively Focused We are highly focused on Asset servicing for institutional investors worldwide Deep client relationships Organic growth supported by strategic acquisitions As a result, an intense focus drives our Market selection strategies Profitability Northern TrustPAGE 10 5

6 Servicing Philosophy Centers on Clients Competition Northern Trust s Approach Product Product Product Product Relationship Product Client Product Client Focus Product Product Capabilities Northern TrustPAGE 11 Client Satisfaction Fuels Attractive Margins Pre-tax Profit Margins* 45% 40% 39.9% 40.7% 35% 30% 25% 20% 15% 10% 5% 31.6% 32.6% 0% Q 2005 *Income before income taxes divided by total revenue Northern TrustPAGE 12 6

7 Acquisition Strategy Tightly Linked to Core Strategies Acquisition strategy focuses on enhancement of capabilities and access to new geographies 2000 Ulster Bank Introduced an offshore fund administration capability Expanded our global footprint Gained experienced staff 2003 Deutsche Bank Increased scale of our index fund product suite Added additional product capability Brought additional top tier talent to Northern Trust Northern TrustPAGE 13 Strategic Acquisition of Baring FSG Capabilities Enhancement Closed March 31, 2005 Purchase Price: 260 million (approximately $500 million) $70 billion in fund administration assets, $33 billion in custody y assets, $32 billion in trust assets $160 million revenue stream (based on 2004 actual results) Enhanced product capability and expertise in: Administration Hedge Administration Private Equity Administration Property Administration Private Trustee Activity Offshore Private Banking Northern TrustPAGE 14 7

8 Strategic Acquisition of Baring FSG Attractive New Geographies Dublin London Isle of Man Guernsey Jersey Northern TrustPAGE 15 Achieving Objectives through differentiation Competitive Differentiators Focus Client Service Innovation Technology Differentiators Fuel FSG Acquisition Global Managers International Northern TrustPAGE 16 8

9 Client Service The Heritage of Northern Trust At Northern Trust client service is all about: Integrity Anticipating client needs Executing on client commitments Caring and being attentive Surrounding our clients with expertise and creative solutions Northern TrustPAGE 17 Client Service The Heritage of Northern Trust Client Service Focus Benefit to our Clients Seasoned relationship staff: Industry expertise Relationship Managers: 12 Years Corporate memory Division Managers: 15 Years Creative solutions Segment Heads: 23 Years Consistent service delivery Service-oriented culture: Management highly attuned Strong emphasis on client service: to client needs 92% of our employees responded favorably* Clients who would re-hire Northern Trust: 95%** Percent of new business from existing clients: 56% Senior Management Commitment: Annual client / prospect visits by Rick Waddell: Over 200 *2004 Employee Opinion Survey **Client Satisfaction Survey Northern TrustPAGE 18 9

10 Unrivaled Client Satisfaction Melior Group Assessment (Reported January, 2005) Overall Client Satisfaction 93% Expectations Are Met / Exceeded 96% 95% Would Hire Northern Trust Again 95% 80% 85% 90% 95% 100% Northern TrustPAGE 19 Client Comments Differentiated Relationship Approach Pfizer has recently expanded our use of Northern Trust's custody services beyond the U.S. because of superior technology, strong client service, and a true sense of partnering to help Pfizer achieve its long-term financial objectives Sharon Kinsman (Client since 1977) Assistant Treasurer, Pfizer Inc. Northern TrustPAGE 20 10

11 Client Comments Differentiated Relationship Approach In looking for an outsourcing provider, Julius Baer recognized the need to find a firm that could offer us a true partnership approach with a strong understanding of our core business and operational requirements. With their flexible technology platform and strong service-oriented approach, the selection of Northern Trust will allow us to enhance our straight-through processing and provide robust reporting and performance measurement solutions to our clients. - Tony Williams (Client since 2004) Head of Asset Management Americas Julius Baer Investment Management LLC Northern TrustPAGE 21 Client Comments Differentiated Relationship Approach M&G undertook a strategic review at the end of 2003 with the objective of streamlining our investment operations... we selected Northern Trust (as our sole global custodian) on the basis of their excellent service quality and track record of delivering on their commitments. John Wright (Client since 2004) Director, Investment Operations, M&G Northern TrustPAGE 22 11

12 Achieving Objectives through differentiation Competitive Differentiators Focus Client Service Innovation Technology Differentiators Fuel FSG Acquisition Global Managers International Northern TrustPAGE 23 Innovation Cross-Border Pension Pooling for Multinationals Economies of scale work to our clients advantage Existing Pension Structure Northern Trust s Pension Pooling Structure UK Pension Irish Pension Dutch Pension Swiss Pension UK Pension Irish Pension Dutch Pension Swiss Pension Client s Pooled Pension Vehicle Various Managers Various Managers Source: Deloitte & Touche Various Managers Northern TrustPAGE 24 Various Managers Investments Plans in different countries invest in a common pooling vehicle Pooling of assets, not liabilities Each plan may select a different asset allocation 12

13 Innovation Cross-Border Pension Pooling for Multinationals Unparalleled Market Leadership First and only custodian to support cross-border pension pooling for Swiss clients Participated in tax- transparent consortium with global asset manager, consultant, and multinational clients First to create tax- transparent pooling vehicles for multinational companies in both Ireland and Luxembourg First and only custodian to offer a solution enabling multinationals to pool their U.S. ERISA plan assets with pension assets from their non- U.S. subsidiaries Authored Articles and Expert Commentary Northern TrustPAGE 25 Innovation Cross-Border Pension Pooling for Multinationals Opportunities Global cross-border assets Multinationals Investment managers New markets ERISA plan participation Luxembourg and Irish fund structures Additional product penetration Foreign Exchange Cash Management Administration Securities Lending Worldwide Potential Northern TrustPAGE 26 13

14 Innovation Global Custody Solution in the Nordic Region In the Past: Custodian Northern Trust Solution: Svenska Handelsbanken Pension s Northern Trust as Custodian Swedish Custodian Pension s Mutual s Mutual s Northern TrustPAGE 27 Innovation Global Custody Solution in the Nordic Region $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 Nordic Region Client Assets ($Billions) $0.02 $21 $86 $19 $ Number of Clients Northern TrustPAGE 28 14

15 Innovation Global Custody Solution in the Nordic Region No additional bricks and mortar Leverages global platform Speed to delivery Norway Sweden South Korea Australia Northern TrustPAGE 29 Investment Risk and Analytical Services Timeline of Services Capabilities First Introduced in Launch of Northern Trust Passport Direct access to integrated custody information Incorporated risk management and monitoring activities Northern Trust Alerts Industry s first on-line investment program compliance monitoring tool Passport Performance Analytics Incorporated performance analysis into Passport to allow institutional clients to analyze their funds worldwide on multiple performance levels bringing together accounting, reporting, and benchmark data Private i Northern Trust becomes the first to link to Private i, private equity analysis from the Burgiss Group On-line Analytics (amentals) Interactive analysis tool available via the Web, providing anytime access to performance, statistical, market index, equity attribution and peer analysis reporting Risk Universe The first peer group comparison for total plan risk allows clients to gain insight into the different strategies employed in the marketplace by understanding the general range of risk across plans Peek Through Clients access underlying asset information for funds Daily Rates of Return Online Event Analyst Assists the investment program manager in identifying market trends before a crisis occurs Executive Reporting Comprehensive reporting solution tailored to meet staff, committee and board information needs Corporate Governance Information integrated into Compliance Analyst On-line Attribution Services Total Attribution Fixed Income Attribution Market Risk Monitor Allows clients to quantify forecasted market risk one year into the future based on Barra s industryleading TotalRisk factors, also provides the insight needed to understand the volatility related to the beta component of their investment program Northern TrustPAGE 30 15

16 Achieving Objectives through differentiation Competitive Differentiators Focus Client Service Innovation Technology Differentiators Fuel FSG Acquisition Global Managers International Northern TrustPAGE 31 Meeting Our Clients Needs with Technology Integrated data and interfaces across: Services Performance Accounting Providers Locations Users Shareholder Data Third Party Data Asset, Pricing, Announcements Asset Inventory Results Single Data Repository Securities Lending Results Portfolio Results Performance Results Accounting Shareholder Reporting Corporate Actions Securities Lending Notifications Compliance Analysis Valuations Risk Monitoring Administration Performance Northern Trust Passport Clients: Treasury / Finance Benefits/HR Accounting Operations Northern Trust: Global RMs Account Managers Performance Consultants Operations 3 rd Parties: Managers Consultants Northern TrustPAGE 32 16

17 Meeting Our Clients Needs with Technology Providing clients with: Accuracy Flexibility Timeliness Cost Effectiveness Northern TrustPAGE 33 Client Comments Meeting Needs through Technology If I need information for a report for my board and it s not a standard report and I don t have time to figure out how to get it and don t have the resources to do it, I make one phone call (to Northern Trust) and if my client service rep is not available, I have three other people I can call. Typically I ll have that report on my desk in 20 minutes. - David Kushner (Client since 1996) Chief Investment Officer of the San Francisco Employees Retirement System (12/13/04 P&I) Northern TrustPAGE 34 17

18 Client Comments Meeting Needs through Technology Northern's technology capabilities were the most competitive...we really liked their on-line systems. Technology was critical and Northern's technology [was] the best fit for our needs. - Daren Perlstein (Client since 2004) Cash Manager, Board of Fire and Police Pension Commissioners of the City of Los Angeles Northern TrustPAGE 35 Client Outsourcing from the C&IS Perspective Clients harnessing Northern s intellectual capital and capabilities Outsourcing at Northern Trust 1960 s 1970 s 1980 s 1990 s Today Consolidated reporting Basic performance reporting Consolidated cash management vehicles Increasingly sophisticated consolidated reporting Safekeeping and settlement responsibility Performance reporting and analysis Investment Operations Outsourcing Alternative Administration Risk Management and Compliance Monitoring Northern TrustPAGE 36 18

19 What is Investment Operations Outsourcing? Front Office Support Investment Services Technology Pipeline Middle Office Support Analytic Tools Compliance Tools Back Office Support Portfolio management Trade decision support Daily performance Daily attribution Trade execution support Pre-trade compliance Trade order management Securities trading Commissions Trade matching Settlement process Reconciliation Post-trade compliance Data warehouse Investment accounting Performance analytics Client reporting Securities services Custody Corporate actions Income collection Cash management accounting administration Transfer agency Northern Trust Assets Under Custody: $2.6 Trillion See Appendix for Glossary of Terms Northern TrustPAGE 37 Investment Operations Outsourcing Keys to Success The right partners Geographic footprint Sophisticated global products Require resources, innovation and technology Relationship-oriented oriented and culturally aligned The right mix of services Multi-product relationship Our platform Delivers efficiency, scale and connectivity Northern TrustPAGE 38 19

20 Julius Baer Back-Office Solution AuA with Northern Trust ($Billions) $30 $25 $20 $24.5 Billion With Northern Trust Single Data Repository $15 Tremendous Scale $10 $7.5 Billion $5 Efficient Communication Links $0 4Q Q 2005 Northern TrustPAGE 39 Corporate and Institutional Services Key Strategies Competitive Differentiators Focus Client Service Innovation Technology Differentiators Fuel FSG Acquisition Global Managers International Northern TrustPAGE 40 20

21 FSG Acquisition Market Opportunities U.K. Accounting and Administration U.K. Mutual s hold $530 Billion in assets 1 Hedge Administration 7,900 funds with $1 Trillion in assets 2 Private Equity Administration Cumulative funds raised, North America: $600 Billion Europe: $221 Billion 1 includes Unit Trusts, OEICs, PEPs and ISAs as of March 31, Hedge Research, as of March 31, Price Waterhouse Coopers; Ageos Research Northern TrustPAGE 41 FSG Acquisition Fuels Expanding Relationships Traditional Asset Servicing Products Hedge Administration Property Administration Private Trustee Offshore Private Banking FSG Clients Northern Trust Clients Private Equity Administration New Relationships New Wins New Geographies Northern TrustPAGE 42 21

22 Global Managers Compelling Market Opportunity Investment Manager Trends Increasing operations and technology spending Focusing on core competencies Demanding regulatory environment Top 500 asset managers CAGR >6.5%, (Pensions & Investments / Watson Wyatt Global 500 Survey) Tremendous cross-sell opportunities Traditional asset servicing products Additional back and middle office products Americas Market $30 Trillion Total World Market $65 Trillion European Market $21 Trillion Asia-Pacific Market $14 Trillion Top 15 Custodians Hold $46 Trillion Source Data: Prudential Equity Group, Globalcustody.net Northern TrustPAGE 43 International Market Opportunities Pension s Asset Concentrations 1 (Top 300 Largest Plans) Canada 5.0% U.S. 52.6% Netherlands Denmark 6.4% 1.3% Sweden UK 1.2% 8.1% Germany Switzerland 1.4% 1.9% Korea 1.5% Japan 13.5% Taiwan 1.8% All Others: 5.3% Norway Pension Asset CAGR : 14.3% 2 Global Custody Revenues from China are estimated at $5 billion 3 Netherlands 10 year pension fund asset growth: 136% 4 1 Pension & Investments September Data Monitor s Pension Opportunities in Europe ING Baring Investment Analyst Report Watson Wyatt Global Assets Study Northern TrustPAGE 44 22

23 International Northern Trust Focus Existing Markets Markets Canada Nordic Region U.K. China Netherlands U.S. Hong Kong Middle East Singapore Priority Segments Public and Private Pension Plans Asset Managers Insurance Companies Financial Institutions Central Banks Commercial Banks Corporate Northern Trust PAGE 45 & Institutional Services Investor Day 2005 Northern Trust Strategic Differentiation CORPORATE & INSTITUTIONAL SERVICES Questions 23