Only one custodian has truly cracked the asset owners sector. Others are way behind and will probably never catch up.
Let’s face it: the asset owners sector is not exactly that exciting. Yes, many Canadian and Australian pension funds are innovative and operate more like fund of funds managers. But, in general, people coming into the industry want to work in more dynamic areas, like alts or securities finance.
Northern Trust has changed all that. Whilst she was COO of Emory Asset Management, Melanie Pickett had a vision. She wanted to simplify and automate the multiple feeds that come into every major pension plan on a daily – often hourly – basis. So she went to Emory’s custodian – State Street, at that time – and outlined her ideas and plans. She was rebuffed. State Street, typically, couldn’t see the potential.
In 2017, Pickett joined Northern Trust after she had presented her vision to them – and they gave her the brief to build the solution. The purchase of Parilux was the first step, a small fintech that became one of the core platforms for what would become Front Office Solutions (FOS).
FOS has been a massive success, now supporting more than USD1trn in assets across all regions. It fills a need that no one else was addressing, not only in the U.S. but globally. It continues to attract some of the best fintech talent, building a team that knows how to get things done.
How have the competitors reacted? Pathetically. Both State Street and BNY have been major underperformers in the sector. Neither can claim leadership positions, and neither has managed to find either the product mix or the right senior management skills. State Street’s AO problems are longstanding. In 2016 it hired Hemant Bhide – who does not lack for self-confidence – as head of the U.S. AO business. Less than three years later, he returned to PwC, having made no discernible impact. It then spooled through other options before it finally made the inspired decision to appoint Jessica Donohue, one of the brightest minds in the industry, to run the global AO business. Donohue was already making progress when State Street moved her. And guess what happened? She quit and, after a brief sabbatical, she returned to the industry at…yep, Northern Trust.
BNY has been little better. Its most recent head of Americas AOs, Anders Reinertsen, recently quit to join Clearwater Analytics. No replacement has been publicly announced. Meanwhile, J.P. Morgan’s strategy appears to rely on its corporate & investment banking relationships, rather than any defining USPs.
Granted, Northern Trust needs to do more work in the insurance sector, where it has struggled to carve out a meaningful market share. But it is certainly leading the way with pension funds, with others left in its wake. It is a complete mystery as to why its competitors have been so sluggish in their response. This is not a niche market, yet it is being underserved by all but Northern Trust, which recently reported more than100 mandates across global markets in 2025, representing >USD385bn AuC.
At this stage, it is hard to see any competitor closing that gap. None has Northern Trust’s relentless focus on this sector – and, until they find the talent and expertise, it’s unlikely that they will move any closer.