Northern Trust (NASDAQ:NTRS) executives highlighted growth priorities across asset management, wealth management, and firmwide productivity initiatives during a post-lunch conference session featuring CFO David Fox and Northern Trust Asset Management President Michael Hunstad.
Asset management positioned as “more than passive”
Hunstad emphasized the scale of Northern Trust’s asset management franchise, describing the firm as part of a small group of “trillion-dollar club” managers. He said the business oversees $1.4 trillion in total assets, alongside Northern Trust’s broader footprint that includes $18 trillion in assets under custody.
Geographically, Hunstad said the business has a global footprint with 16 physical locations and clients across many countries, including insurance and pension clients in the U.S. and U.K. and superannuation in Australia. He also said Northern Trust recently signed deals in Saudi Arabia for passive and quantitative strategies.
Key growth vehicles: ETFs, alternatives, and custom SMAs
Beyond traditional mutual funds and collective investment trusts (CITs), Hunstad spotlighted two vehicles he characterized as central to growth: exchange-traded funds (ETFs) and custom separately managed accounts (SMAs). He said Northern Trust has been in ETFs for more than two decades and is a top-three custom SMA provider by assets, with $150 billion in the custom SMA platform.
He described industry expectations for “double-digit” growth in ETFs, alternatives, and custom SMAs, and said Northern Trust intends to “double down” in those areas. In discussing recent execution, he said innovation and faster product launches are key priorities, noting the firm had not launched an ETF for several years prior to activity in late 2025.
Hunstad listed several 2025 developments intended to carry into 2026:
- ETFs: Launch of 11 ETFs in late 2025, including laddered fixed income ETFs (municipal and TIPS) designed to help clients create cash-flow-like streams without locking assets into annuity contracts.
- Alternatives: Fundraising up more than 2.5 times year-over-year, alongside “significant investments” and plans for more intermediary-channel emphasis.
- Custom SMAs: More than $5 billion of asset gathering in the prior year, expansion into new channels, and increased focus on long-short tax-advantaged strategies.
- Liquidity: $35 billion in growth last year and 12 consecutive quarters of asset growth.
Tokenization and AI: early use cases and infrastructure focus
Hunstad said Northern Trust launched its first tokenized share class of a treasury-only fund, which he said has more than $10 billion in assets. He described a specific use case: clients seeking to use tokenized money funds, particularly treasury-only funds, as collateral for derivatives contracts. He said tokenization can enable greater tradability “24/7, 365” and help clients pledge holdings as collateral.
Fox added that, on the asset servicing side, the firm is focused on ensuring infrastructure can accommodate tokenized assets in a “chain agnostic” way, so tokenized assets can be reported similarly to traditional assets.
On AI, Fox said the initial goal was broad adoption, and the firm rolled out Copilot to the employee base. He said the company has a backlog of 150 use cases that it is prioritizing based on productivity and revenue potential. He cited current applications including document digitization, new client prospecting, faster responses to asset servicing RFPs, GitHub Copilot for coding, and an internal tool called NT Byron that employees can use to build task-focused agents.
Firmwide priorities: “One Northern Trust,” productivity discipline, and growth mix
Fox said a key organizational change was creation of a COO function to centralize best practices and reduce siloed execution under what he called the “One Northern Trust” effort. He described a planning approach that starts with productivity targets and KPIs rather than expense growth targets, with investments and expense growth framed around productivity outcomes.
He said the firm’s major investment areas include technology—both foundational and business-driven—adding that at least 50% of technology spend is aimed at growth and business enablement. He also said Northern Trust is leaning heavily into wealth and asset management growth initiatives, including an expansion of “Family Office Solutions,” described as delivering a “virtual family office” experience to clients who want family office-style services but may not have their own dedicated family office infrastructure.
Margins, NII outlook assumptions, and capital allocation posture
Fox said Northern Trust’s updated medium-term targets are framed over a 3-5 year horizon, with the goal of sustaining a “healthy margin,” citing 33% as an example, through cycles rather than relying on market lift or net interest income (NII). He said the firm is shifting its mix toward wealth and asset management, which he said already carry margins above that target, while refocusing asset servicing on asset owners where he said most new deals are at or above the margin target.
On interest rates and NII, Fox said guidance assumes two rate cuts for the year and that management sees mitigating actions including deposit pricing changes implemented mid-to-late last year (which have not yet been “lapped”), securities roll-off and repositioning, and leaning into alternative investments such as FICC repo. He said the securities book duration is about 1.5 years and balance sheet duration is less than one, which he said supports flexibility as assets reprice. Fox also said NIM compression is not expected unless rates move into the “twos,” which he did not expect this year.
On productivity funding for investments, Fox outlined three categories: workforce (including span-of-control goals and shifting hiring toward lower-cost locations), vendor consolidation and centralized procurement, and process automation. He said the bank has contingency plans with pre-agreed levers and a distinction between mandatory and discretionary investments to allow expense responses in weaker environments.
Regarding capital allocation, Fox said regulatory rules are unchanged and reiterated a 11%-12% CET1 target, while noting the firm is “leaning more into inorganic than we ever have before” and wants dry powder for potential opportunities in wealth or asset management. He said any inorganic move would be selective, aligned with Northern Trust’s core businesses, and could include partnerships or distribution agreements, not necessarily acquisitions.
About Northern Trust (NASDAQ:NTRS)
Northern Trust Corporation (NASDAQ: NTRS) is a global financial services firm headquartered in Chicago that provides asset servicing, asset management and wealth management solutions to institutions, corporations and high-net-worth individuals. The company’s core businesses include custody and fund administration, investment operations outsourcing, trust and fiduciary services, private banking, and retirement and defined contribution plan services.
Northern Trust’s product and service offerings span custody and fund accounting, portfolio and performance analytics, securities lending, cash management and foreign exchange, as well as discretionary and non-discretionary investment management.
