Greater China-based Corporation:

Creating a Sustainable Plug-and-play Model to Achieve Investment Scalability and Cost Efficiency across Multi-Asset Classes

Northern Trust helped Jebsen Capital, a greater China-based corporation with more than US$1 billion in AUM, institutionalise and evolve their investment and operating model.

CLIENT BACKGROUND

With a history of over 125 years, Jebsen Capital (“client”) is a corporation headquartered in Hong Kong, with an investment arm that oversees the proprietary capital investments that holds global equities investments and a multi-asset class portfolio of public market securities. Their AUM was growing rapidly as were their resources spent on administering their operating model, one with numerous private banks and brokerage relationships.

Achieving their goal of a scalable, cost-effective, transparent and future-proof model required a change in strategy. Therefore, they looked to identify a strategic asset servicing provider with the requisite expertise and capabilities to help them evolve to a more efficient business model - one that allowed them to focus on their core activity of portfolio growth and diversification, while navigating a tough economic environment.

THE OPPORTUNITY

The client’s previous operating model included accounts held with multiple private banks and trading brokers. This increased expenses and data aggregation efforts, restricted scalability, and did not offer a single portfolio view. The client was also concerned with the limited attention from existing vendors despite long-standing relationships.

While the client had clear aspirations of consolidating accounts and institutionalising their setup to improve their investment and operating model, the benefits of outsourcing non-core functions, i.e. scalability to support a growing AUM and mitigating costs across the front, middle and back office, were not fully understood.

Northern Trust’s journey with the client to identify their target operating model was premised on key goals:

- Support growth through scale and maximise variable cost solutions for non-core activities.

- Easy access to various asset classes to navigate economic headwinds.

- Leverage interoperability to drive efficiencies across the front, middle and back office, while reducing impediments.

- Drive results by focusing internal resources on strategy, allocation and investment decision-making.

- Enhance transparency and data aggregation across multiple portfolios, alleviating manual inputs when compiling management reporting.

- Embed future evolution into the model to overcome increasing complexity and allow for growth.

THE SOLUTION

Northern Trust offered an integrated investment and operations ecosystem that delivers efficiency and value drawing on our core strengths, while supporting seamless integration and collaboration with other providers engaged by the client:

- Modular end-to-end operating model: Northern Trust provides outsourced trading*, foreign exchange, custody and cash sweep service into Northern Trust’s money market funds.

- Ecosystem Integration: We plugged into the client’s core data and infrastructure, and integrated with their order management and risk systems to offer a consolidated portfolio view and transparency into trade economics across asset classes.

- Reporting Solutions: Our end-client on-demand reporting solutions provide instant reporting and transparency, including daily and monthly audited portfolio statements to support the client’s oversight and governance.

- Transition and Implementation: A dedicated relationship management team prepared extensively with weekly calls with the client and their counterparties throughout implementation. This ensured full transparency during the transition and expedited the onboarding.

The client has since expanded their strategy from equities and bonds to money markets funds and digital assets. We have added services to support the required fund types including capital call execution support and initiating crypto custody discussions with our strategic partners. With an aim of deepening the strategic partnership for both parties, Northern Trust maintains regular conversations with the client to evaluate future opportunities, including long-term investment strategy and operating model plans. This enables Northern Trust to proactively respond to the client’s changing needs.

*Northern Trust’s ‘Integrated Trading Solutions’ (ITS) is its outsourced trade execution solution for internally managed portfolios – Northern Trust acts as the trading desk, and provides trade execution, matching, and settlement management for the client. The client benefits by replacing the fixed costs of an internal trading team for the variable costs of ITS while capitalising on Northern Trust’s scale and global expertise.

THE RESULTS

Our partnership has been a great success despite the pandemic, market volatilities and other uncertainties

- Consolidating multiple relationships and outsourcing trade execution to Northern Trust achieved two key objectives for the client:

Provided access to a wide range of brokers at competitive rates in global markets, across equities, fixed income, with other asset classes available including listed futures and options
Simplified the client’s operations substantially. It reduced the number of third-party due diligence activities and overall trading costs while utilising third-party trade analytics to monitor Best Execution.

- The coordination of trade execution, buy-side trade matching/affirmation, and trade settlement via custody created a straight-through model that reduced of the manual intervention required previously, freeing up time to re-focus on other “true” core priorities – investment portfolio growth and diversification.

- In-house teams now minimise time spent on data aggregation for board and investment committee meetings and maximise efforts on higher-value analysis and governance activities.

- The client enjoys a more efficient, transparent, and responsive operating model with 24/7 support from Northern Trust and is effectively supported by a strong and experienced regionally based servicing team, that better integrates with the firm’s broader investment process and operating model goals.

Northern Trust contributed to the client’s success by offering flexibility, efficiency, scalability and superior client service. We continue to help the client evaluate opportunities and evolve their operating model to meet future demands as they grow.

In the search for improved alpha, asset owners like established corporations are increasingly looking to become capital-light. By outsourcing variable cost components to scale providers, and retaining core intellectual property i.e. decision making, they benefit from greater margin resiliency and agility in the face of asset volatility, and improved scale economics.

Aisling Keane

Head of Hong Kong, Northern Trust

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