Northern Trust Spins Off Entire Alts Operation

Northern Trust has spun out its hedge fund and private equity business under the new moniker 50 South Capital Advisors, the firm announced Monday.

The infant boutique retains close ties to its corporate parent via existing clients, ownership (Northern Trust owns 100% of the company), and location. 50 South—a nod to Northern Trust’s headquarters at 50 South LaSalle Street in Chicago—has inherited $3 billion in client capital under management and $1.3 billion on which to advise.

“Investors will benefit from a highly motivated and aligned investment team at 50 South Capital, coupled with the resources and global network of Northern Trust.” —Robert MorganRobert Morgan, appointed head of the original alternatives unit in 2011, has likewise maintained his role through the transition. A former director at local private equity fund Frye-Louis Capital, Morgan now leads 50 South’s investment operations as managing director.

The entire Northern Trust alternatives team has transitioned to join Morgan at the new entity, according to the parent company.

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“Investors will benefit from a highly motivated and aligned investment team at 50 South Capital, coupled with the resources and global network of Northern Trust,” Morgan said.

Like its progenitor, 50 South Capital will specialize in private equity and hedge funds-of-funds, although a spokesperson would only refer to this product line as “multi-manager solutions.”

The boutique also advises on custom portfolios and has the capacity to serve as outsourced-CIO for institutions’ entire alternatives buckets.

Stephen Potter, president of Northern Trust Asset Management, called the launch of 50 South “a milestone” for the 125-year-old financial giant.

Improving longevity among pension fund members means the majority of pension funds will fail to reach their long-term investment goals, according to an investor survey by Swiss fund manager GAM.

At a conference last week 78 institutional and wholesale investors were surveyed, with 78% casting doubt on the long-term viability of pensions’ investment strategies.

The respondents also said regulation could hamper investment success, as 64% said regulation needed to change to allow more flexibility in asset allocation.

“The investment backdrop has changed dramatically in recent years as monetary policy has begun to diverge and we believe that the markets have reached an inflection point.” —Alexander Friedman, GAMSeveral organizations have issued stark warnings about the impact of increasing life expectancy on liabilities in the past 12 months. The Organization for Economic Co-operation and Development said in December that pension policymakers had yet to fully confront the effects of demographic change, adding that it would take “many years” to push through changes to address these problems.

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New mortality tables in the US added $29 billion to the liabilities of 19 of the country’s biggest corporate plans when introduced in March, according to research by Russell Investments.

Elsewhere in GAM’s survey, respondents said geopolitical risk, a stalling economic recovery, and the path of interest rates were the top three biggest risks currently faced by investors. Less than a third (29%) said Greece exiting the Eurozone was one of the top risks, while 21% highlighted a hard landing in China.

“The investment backdrop has changed dramatically in recent years as monetary policy has begun to diverge and we believe that the markets have reached an inflection point,” said Alexander Friedman, GAM’s group CEO. “The indiscriminate market rally in risk assets is coming to an end and investors have to take a truly active approach to identify the sources of alpha for the coming years.”