In April of this year, Northern Trust expanded its fund administration and custody capabilities to support locally domiciled Hong Kong funds, including exchange-traded funds, as well as other regional investment funds.
In April of this year, Northern Trust expanded its fund administration and custody capabilities to support locally domiciled Hong Kong funds, including exchange-traded funds, as well as other regional investment funds.
And the planning, says Clive Bellows, country head of Ireland at Northern Trust, was prolific. “It’s a new domicile, so that takes some time to plan and get all the right structures in place.”
The bank stated that its aim of expanding was to help meet demand from asset managers to launch local investment products in the greater China area. Bellows added that the decision was driven by Northern Trust’s big global clients; looking to increase their distribution in Asia, and not always able to get UCITS funds authorised for distribution.
“UCITS has already got a strong record in Asia, but some domiciles such as Hong Kong are making it more difficult to distribute the UCITS product,” he says. “We see fund managers as a result looking to either go local, or have a market like Hong Kong switched on for them.”
“As a result, they’re now starting to plan to launch local fund products, so from our perspective, being able to support them with this was an important evolution of our global product offering.”
The Hong Kong funds will complement the global array of fund structures supported by Northern Trust, including UCITS funds in Europe, and mutual funds and collective investment trusts in the US.
For exchange-traded funds ETFs, Northern Trust brings to the Asia-Pacific region what it calls a “unique” service infrastructure that exists in Europe, which it believes will enhance product efficiencies for clients in Asia.
“There are two products dominating the market at the moment—equity and ETFs,” says Bellows. “Asian investors are traditionally very pro-equity, and I think we’ll continue to see growth in that region. Given ETFs are equity driven products, we can also expect to see growth there.”
Bellows adds that the firm believes the Asian ETF market will evolve in a similar way to the European ETF market—and the fact that Northern Trust can support various ETFs, and that its capabilities can be easily translated for an Asian market will only be a plus.
For the newly launched service, Northern Trust will provide global sub-custody and fund administration services, including fund accounting and shareholder services, to asset managers looking to broaden their product and distribution base in the Asian region.
Camie West, head of global fund services in Asia for Northern Trust, said at the time that the firm recognised the significant demand from investors, asset managers and regulators for local products in the Hong Kong and greater China markets.
“This service offering provides our asset manager clients with improved access to these markets through locally domiciled vehicles, coupled with Northern Trust’s fund administration expertise and proven global infrastructure,” he added.
Paul Fahey, head of product and strategy for global fund services, said that many successful international and local Asian managers are extending their product reach into all regions, and in particular there has been an increased focus on Asia for the distribution of funds.
As to why, Bellows comments that when looking at Asia, there are two sides to the coin. “One is, can I get my fund distributed? And the second one is the investment opportunity, and trying to have control. Fund managers are looking for increased distribution and if they can’t get it via UCITS, then they will need to go local.”
“There is also another very interesting development, which is that the Chinese government is loosening up its quotas and to make it easier for a Hong Kong domiciled fund to get a quota than some international products. Again, I think that may be attractive to some fund managers because it potentially gives them quicker access to investing into China,” says Bellows.
Most recently, Northern Trust appointed Brian Ovaert as its Hong Kong country executive in order to cope with the new demands of its expanded fund administration business. Ovaert is a 21-year Northern Trust veteran, relocating from Bangalore.
He will oversee both the expanded Hong Kong office and the Northern Trust sales and relationship teams, who deliver global custody, fund administration, investment operations outsourcing and asset management solutions for institutional clients in the region.
Northern Trust opened its Hong Kong office in 1995 and moved to larger quarters on Queensway in 2012 to accommodate growing numbers.
Significant recent additions to the Hong Kong staff also include Bradley Blackwell, sales and relationship management for securities lending clients in APAC and Elmen Lo, relationship management for asset servicing clients in the North Asia region.
