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Northern Trust Press Release

 
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Mutual funds transformed by Northern Trust into tax efficient structures could save investors up to 50 basis points

 

 

London & Luxembourg, December 05, 2012 —

In line with its continuing commitment to offering innovative products and services, Northern Trust (Nasdaq: NTRS) can transform Fonds Commun de Placement (FCP) mutual fund structures used by investment managers into tax-efficient structures which optimise tax transparency and reduce withholding tax drag.

According to Northern Trust’s proprietary calculations, dependent on the mix of assets in the portfolio, mitigating taxation on dividend income for institutional tax-exempt investors in FCPs through its solution could save investors up to 50 basis points per annum.

An FCP is a tax transparent entity established in Luxembourg through which investors may qualify for reduced withholding tax rates on equity dividends. This transparency can help investment managers improve performance, increase investor returns, and increase assets by aggregating tax exempt investors from multiple jurisdictions.

“By their nature, all FCPs are tax transparent, however we are seeing a number of FCPs which are not fully optimised to access the benefits of withholding tax transparency,” said Martin Shah, Partner at Simmons & Simmons LLP, a leading international investment funds law firm working with fund managers looking to optimise the tax transparency of their investments. “Northern Trust’s solution to change the structure of these funds to enable them to access the benefits of tax transparency is, in our experience, a much simpler solution than moving investors into an alternative fund vehicle.”

“Withholding tax efficiency can be a performance differentiator, particularly in the current market environment,” said Aaron Overy, head of asset servicing pooling business development at Northern Trust. “Our pooling platform has been specifically created to remedy the technical obstacles to tax transparency for FCP mutual funds, without the disruption of a fund migration, and with all operational, legal and tax considerations causing little to no disruption to the day-to-day business of fund management.”

Northern Trust is a pioneer in cross-border tax transparent asset pooling and was the first to fully support tax-transparent funds, created to pool the assets of investors from multiple jurisdictions with multiple tax rates, investing in multiple jurisdictions. This latest solution to optimise the fiscally transparent nature of FCPs follows proprietary research announced earlier this year which found that a tax-transparent asset pooling vehicle can enhance returns by as much as US$81 million on a US$1 billion portfolio invested in broad market indices over a 10 year period. 

As of June 30, 2012, Northern Trust has 25 clients on its tax-transparent, global pooling platform, with more than U$62 billion of assets under custody. Earlier this year it announced it had become the first custodian to work with a client to secure reduced withholding tax rates for Swedish investors holding equities through a tax-transparent, cross-border asset pooling vehicle.

About Northern Trust

Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of investment management, asset and fund administration, banking solutions and fiduciary services for corporations, institutions and affluent individuals worldwide. Northern Trust, a financial holding company based in Chicago, has offices in 18 U.S. states and 16 international locations in North America, Europe, the Middle East and the Asia-Pacific region. As of September 30, 2012, Northern Trust had assets under custody of US$4.8 trillion, and assets under investment management of US$749.7 billion. For more than 120 years, Northern Trust has earned distinction as an industry leader in combining exceptional service and expertise with innovative products and technology. For more information, visit www.northerntrust.com or follow us on Twitter @NorthernTrust.

The material within and any linked material accessed via this communication is directed to eligible counterparties and professional clients only and should not be distributed to or relied upon by retail investors. For Asia Pacific markets, it is directed to institutional investors, expert investors and professional investors only and should not be relied upon by retail investors.

Northern Trust (Guernsey) Limited, Northern Trust Fiduciary Services (Guernsey) Limited, and Northern Trust International Fund Administration Services (Guernsey) Limited are licensed by the Guernsey Financial Services Commission. Northern Trust International Fund Administrators (Jersey) Limited and Northern Trust Fiduciary Services (Jersey) Limited are regulated by the Jersey Financial Services Commission. Northern Trust International Fund Administration Services (Ireland) Limited, Northern Trust Securities Services (Ireland) Limited and Northern Trust Fiduciary Services (Ireland) Limited are regulated by the Central Bank of Ireland. Northern Trust Global Services Limited has a Luxembourg Branch, which is authorised and regulated by the Commission de Surveillance du Secteur Financier (CSSF). Northern Trust Luxembourg Management Company S.A. is regulated by the Commission de Surveillance du Secteur Financier (CSSF). Northern Trust Global Investments Limited has a Netherlands branch, which is authorised by the Financial Services Authority and subject to regulation in the Netherlands by the Autoriteit Financiële Markten. Northern Trust Global Services Limited has a Netherlands Branch, which is authorised and regulated in the Netherlands by De Nederlandsche Bank. Northern Trust Global Investments Limited has a Sweden branch, which is authorised by the Financial Services Authority and subject to regulation in Sweden by the Finansinspektionen. Northern Trust Global Services Ltd (UK) Sweden Filial is authorised by the Financial Services Authority and subject to regulation by the Finansinspektionen. "Northern Trust Global Services Limited operates in Abu Dhabi as a Representative Office, Licence number 13/238/2008 which is authorised and regulated by the Central Bank of the United Arab Emirates. The Northern Trust Company operates in Australia as a foreign authorised deposit-taking institution (foreign ADI) and is regulated by the Australian Prudential Regulation Authority. The Northern Trust Company has a branch in China regulated by the China Banking Regulatory Commission. The Northern Trust Company of Hong Kong Limited is regulated by the Hong Kong Securities and Futures Commission. Northern Trust Global Investments Japan, K.K. is regulated by the Japan Financial Services Agency. The Northern Trust Company has a Singapore Branch, which is a foreign wholesale bank regulated by the Monetary Authority of Singapore. The Northern Trust Company operates in Canada as The Northern Trust Company, Canada Branch, which is an authorised foreign bank branch under the Bank Act (Canada). Trustee related services in Canada are provided by the wholly owned subsidiary The Northern Trust Company, Canada, an authorised trust company under the Trust & Loans Companies Act (Canada). Deposits with The Northern Trust Company and its affiliates and subsidiaries are not insured by the Canada Deposit Insurance Corporation.


IRS CIRCULAR 230 NOTICE: To the extent that this message or any attachment concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law. For more information about this notice, see http://www.northerntrust.com/circular230.

 
 
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