The Ledger
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Harvard, Stanford, and Yale endowments struggled with inadequate software and spreadsheets
“And so I would walk naively into Harvard or Stanford or Yale, these institutions that are so well-respected in the industry and doing amazing work, They were still struggling with their tool sets as well. No one had figured it out”
VC-backed fintech capital structures are unsuited for operational service margins
“In fact, the capital structures of most of these VC backed fintechs are not well suited to offer operational services just because the revenue and margin looks very different, right?”
Institutional investors rely on manual spreadsheets across fragmented software systems
“As much as every institution has some sort of permutation of a CRM system and a performance system and a risk system in some way that they're tracking liquidity and they have a custodian, they still are responsible for shipping data between those systems and m…”
Asset allocators historically relied on asset manager technology hand-me-downs
“Allocators kept getting
Investment manager hand-me-downs, or they kept getting in bed with firms that would really service their asset manager clients before them.”
Custodial books are insufficient for institutional investment decision-making
“Accounting books and custody books are not really fit for purpose for making investment decisions, and so they're meant to be monthly, they're meant to be settlement date based, and as asset owners and allocators started making more investment decisions in-hou…”
Asset allocators are consolidating tech vendors to fewer deep partners
“What we see is clients who do that tend to realize, just like their investment partners, they don't want hundreds of investment managers, right? They want stronger, deeper relationships with fewer investment managers. The same thing is happening on the service…”
Asset custody is highly commoditized and faces growing pricing pressure
“While custody and safekeeping is really important, it's a big, beautiful business for Northern.
[1523] Melanie Pickett: It's highly commoditized and pricing pressure is significant and growing by the day.”
WTW study: Shift to total portfolio allocation adds 150 basis points
“WTW put out a study through their Thinking Ahead Institute recently that the shift from strategic asset allocation to total portfolio allocation, most CIOs or investment offices think that that can add a 150 bips to their portfolio.”
Institutional shift toward data-driven portfolio allocation is irreversible
“Not everyone's going to make that shift immediately. It's the big sovereigns and the big supers that are doing it right now. But we believe that the data-driven approach to asset allocation is a change that people are not going to reverse. That's going to only…”
Pickett estimates 200 global investors run complex alts and internal trading
“And so for our investors, there's probably 200 in the world that have very highly complex alts portfolios, but also do significant internal trading.”
Institutional allocators reject separate systems for public and private data
“BlackRock and certainly the work that they've done to acquire eFront and try to pull together Aladdin and eFront, these are all the same indicators, right? That clients no longer want their public markets data and their private markets data into separate syste…”
Asset owners want manager transparency for risk, not front-running
“Asset owners are not trying to reverse engineer portfolios or front run your trades. They're really just trying to understand their exposure and understand their risk”
Endowments do not compete against each other except on annual returns
“Endowments and foundations don't compete against each other, right, except once a year when the press comes out on the returns, and so there's this really amazing community of COOs and others who talk all the time.”
Northern Trust's Front Office Solutions reached $450B in AUA
“So we have north of four hundred and fifty billion on the platform now. We launched about three and a half years ago.”
Asset owner business generates 20% of Northern Trust's total revenue
“It's about half of Northern's assets under custody at large, and it's about 20% of the bank's revenue, so it's a really big, important business for Northern.”
Northern Trust built middle office for $100B+ spin-out family office
“Really our second client was one of the world's largest family offices... We weren't converting off of other systems as much as trying to build the history of their book, and we did that north of a hundred billion in assets and did that for all the family memb…”
Northern Trust's Front Office Solutions has gated annual client onboarding
“To this day, we've still never made a cold call to try to get business into front office solutions.
[1565] Melanie Pickett: We've had to gate our onboardings every single year.
[1568] Melanie Pickett: We've had to gate client demand because we've had so much d…”
Pickett's former investment office received 30,000+ annual manager communications
“In my prior life, we received 30,000 plus communications from managers on an annual basis.”
Northern Trust automated alternative investment document retrieval using Python
“We've completed an effort to completely roboticize using Python and robotics, going out and getting the documents off the portals and pulling them into our systems automatically.”
Northern Trust integrates Citadel-acquired Omnium into Front Office Solutions
“We're taking two systems at Northern Trust. One, the front office solution system, which does have an incredible data model around alternatives, and combining that with the power of a system that we bought called Omnium, which we bought from Citadel.”