Northern Trust expands buy-side users for FX currency management operations

The new client wins signify a growing acceptance among asset managers to use custodians for a range of front-office services.

Northern Trust has seen significant uptake of its FX currency management services after expanding multiple asset servicing mandates with buy-side clients over the past year.  

The Chicago-based custodian has onboarded the likes of European asset managers Blackwall Capital Investment, Kieger and TT International Asset Management, while also expanding its existing mandate with The Asset Management Exchange (AMX) and Rockefeller Asset Management. 

The mandates build on several new client wins for Northern Trust in recent months, which included a middle-office and outsourced FX dealing mandate with US hedge fund Strategic Global Advisors, and a front- and middle-office outsourcing deal with asset manager Westwood Holdings Group.   

“Northern Trust drew on its deep understanding of FX currency management to design a sophisticated solution, directly addressing the objectives and challenges of a significant underlying investor in Rockefeller’s Global ESG Equity UCITS Fund,” said Chip Montgomery, head of business strategy and corporate development, Rockefeller Asset Management. 

“By delegating currency share class hedging activities to Northern Trust, we have delivered currency hedging solutions to the growing number of sustainability focused investors on our UCITS platform; all while retaining oversight through Northern Trust’s advanced performance analytics.” 

The new client wins signify a growing acceptance among asset managers to use custodians for a range of front-office services as they look to offset the pressures brought on by the pandemic and other buy-side investment operational trends.  

“A combination of rising operational costs, governance pressures and regulatory requirements are encouraging asset managers and asset owners to delegate their FX currency hedging to a specialist third-party who can efficiently manage FX risk, enabling them to focus on their core investment process,” added John Turney, global head of Foreign Exchange at Northern Trust.  

“This trend has been further accelerated by the COVID-19 pandemic, which has heightened the need to respond quickly to market events in order to manage and mitigate currency volatility in global investment portfolios.” 

Northern Trust’s currency management services comprise of share class hedging, portfolio overlay and ‘look through’ hedging solutions to help asset managers and asset owners manage and mitigate currency volatility for their international investment portfolios. 

Last year, the bank announced it had enhanced its currency management solutions with machine learning models designed to enable greater oversight of thousands of daily data points and help reduce risk throughout the currency management lifecycle, in conjunction with its strategic partner Lumint.