In August this year the North Dakota Retirement and Investment Office became the first large U.S asset owner to outsource trading to Northern Trust and Melanie Pickett, head of asset servicing, Americas, expects this trend to continue.

Northern Trust said in a statement  in August that its 35-year relationship with the North Dakota Retirement and Investment Office (NDRIO) was expanding to include outsourced trading services, through the firm’s Integrated Trading Solutions (ITS) platform. NDRIO manages investments for more than two dozen client funds, the largest being the $12bn North Dakota Legacy Fund, Public Employees Retirement System, Teachers’ Fund for Retirement, and Workforce Safety & Insurance Fund.

Scott Anderson, chief investment officer of NDRIO, said in a statement outsourcing will enable the agency to operate with greater efficiency, reliability, and scalability as it brings more assets in-house.

Pickett told Markets Media the Northern Trust’s front office solutions platform was launched six years ago and now has more than $ 1tr in assets either on the platform or being onboarded.

“We started with the thesis that some clients would be software only and some would take us up on middle office services,” she added. “Every single one of those clients uses our middle office services which speaks technology alone cannot solve the data needs for investment offices – it requires knowledgeable operation services as well.”

Pickett continued that asset managers have been under cost pressure for some time, but asset owners are feeling the same pressure. Both asset owners and asset managers are trying to keep up with the pace of change of technology, their target operating model, how to use AI in their investment process as well as changes in the global macroeconomic environment.

“Segments of the market that have typically not been open to outsourcing middle office services are now open,” Pickett added.

In addition, conversations are getting more frequent around digital and tokenized assets according to Pickett.

“One of the bigger shifts that we are seeing is that clients are thinking about liquidity very differently,” she said. “Cash and liquidity and how they use that as an asset class are a big part of the conversation.”

Private markets

There are also continuing moves into private assets, which brings challenges around valuations and transparency. In August this year President Trump issued an executive order to make it easier for workplace retirement plans to offer alternative investments including private equity.

Pickett highlighted that in the UK Northern Trust services the LTAF fund regime which provides a broad range of investors with increased access to private markets. In May this year Northern Trust said in a statement that it is providing Partners Group with fund administration, depositary, and banking services for its first LTAF. Switzerland-based  Partners Group is one of the largest firms in the private markets industry with over $150 bn of assets under management at the end of last year according to the statement.

“We service a number of the largest LTAF vehicles and that structure is very similar to what I think will be implemented in the U.S,” she added. “We have been able to get ahead of the curve there.”

Northern Trust’s operations teams uses one one global operating platform so the technology used in the UK to service LTAFs could easily be dropped in the U.S. to service private assets in retirement schemes according to Pickett.

In addition, she continued that Northern Trust has digitised the capture of data and documents for alternative assets. In 2024 Northern Trust also said in a statement that it had entered into an exclusive agreement with Hamilton Lane for the private markets investment management firm to provide its proprietary software, Cobalt LP, and integrated services to Northern Trust Asset Servicing clients.

Cobalt provides private market analytics and pre-commitment research capabilities in a digital, turn-key format so Northern Trust can offer clients access to Hamilton Lane’s private market data, analytics.

Griffith Norville, head of technology solutions at Hamilton Lane, said in a statement: “Through this exciting collaboration, we seek to deliver a new level of transparency and timeliness to Northern Trust client portfolios.”

In 2023  Northern Trust also agreed  to make available Novata’s ESG data management software solution for private markets available to Northern Trust asset servicing clients, which Pickett described as an important partnership.

Growth strategy

In order to continue to grow, Pickett said the business needs to stay focused on its products and technology roadmap. There will be additional investment in cash and liquidity capabilities, additional online and data delivery capabilities, and ensuring that the right data and analytics is in the front office space.

Northern Trust is also rolling out a platform called A-Suite to provide content for asset owners. The platform also includes building a social community to allow clients to connect with one another and share best practices. For example, pension plans in Australia and Canada have included privates assets in their schemes for a long time, and can provide advice to U.S asset owners.

“We’ve had an incredible year,” added Pickett. “We have had an incredible win rate and client retention rate.”