YouSaid · the spoken record

Melanie Pickett

lines on the record: 55
first: 2022-11-17
most recent: 2022-11-17
sittings or episodes: 1
sources: podcast

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“Ted, it was great to talk to you today. I don't know if you remember how we first met, you were looking for an intern and we were all such huge fans of your podcast within Front Office Solutions. And one of my young employees said, hey, why don't you call him and ask him if we can be his interns? You'll have a constant pool of analysts who will be happy to help him. And I think that was the first phone call we had. And I think we scheduled it at like 1045 one evening because we were both so busy. But working with capital allocators over the last few years has been such a huge pleasure of mine and such a big part of our growth in front office solutions. You know, when I started the business, I needed a way for people to know that Northern Trust wasn't just custody or just asset management, that if they were looking for a software solution, they would call us as well. And so we've had so many people call in and ask for demos and become clients, you know, because they heard about us on Capitol Allocators. And I just want to thank you for the partnership that you've given us over the last few years.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“Before great growth comes great fear. So I think as a woman sometimes, or really anyone, you're taught that if you're afraid of something, you know, if you're afraid to go down a dark alley or you're afraid of being in a situation, your body's probably trying to tell you something, right? But it's not the case. And so I think if I look back on the times that I had the most professional growth or a personal growth, I was terrified, right? Before that happened. And so I think I wish I had known to lean into that earlier and not back away or sort of self-select myself out of situations that could have been incredible for me because I was afraid. And so now anytime I feel that nervous energy or that fear, I think it resonates with me now that it just means something good is around the corner.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“As I mentioned, I am the daughter of two public pensioners. I'm extremely passionate about the asset allocator space because of the way that I grew up. I went to college on a college scholarship. I have family members that had medical care and huge major surgeries because of medical advances at Emory, in fact. And so I think it's the work ethic, both of my parents worked multiple jobs to make ends meet. I grew up quite poor. And so I think that that work ethic and that drive to achieve is something that I have to give them credit for.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“I operate at the very tail end of appetite for change, the tail end of the spectrum. And so I think sometimes I have to really step back and remember that not everyone is as comfortable a change as I am. And so I have to bring people along in different ways. And so I don't know that it's a blind spot. I know that about myself, but I do have to stop and remind myself that not everyone wants to change or has that appetite. I think the other thing is that I'm an instinctual decision maker and thankfully usually right, but not always, right? And so stopping and taking the time to slow down and have inputs from people that are more data driven in their decision making is something that I've learned that I have to do.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's people. It's always people. When I think back on what I'm most proud of, it's never an individual accomplishment that I achieved or really even anything related to the work itself. It's always the people and the growth that I see in those people. I've got an employee that worked for me at Emory that is now the deputy CIO at a large state pension. And his path is one that's incredible. And it's one that I hopefully played some small part in. Having a high performing team, assembling them, seeing them push themselves harder than they thought possible for themselves and seeing them achieve things that they didn't know they could achieve. That's the best part.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“I would say Dan Hullahan and Pete Erowich both who have been tireless advocates and probably took a lot of bad phone calls from people that were upset with me and never even told me about it, but people that just kept saying, you know what you're doing, keep going. You've got this and helped me push through some of the battles that we faced.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“Second person I would say is someone that I worked for at Northern Trust who was there on the days that it was really tough to try to stand this business up and try to keep faith and do the hard work that it took to change the bank in doing so. And so my management team at Northern Trust got me through some really tough days and I'm glad that they did.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“This is such a hard question to answer because I've had dozens, I think two really stand out. One, I had a manager at Morgan Stanley, Mike Lamena, who now runs Wealth Spire. He was an English major at Notre Dame, and I had a bad habit of really just blasting people in emails. I wasn't very polished or professional in my approach sometimes. And Mike would call me over to his desk and say, hey, will you help me out with the grammar of this sentence on an email? And he did not need me to read his email and give him any English grammar advice. But it was his way of showing me how he constructed a tough email and delivered a tough message without being as brutal maybe as I had been. And so in hindsight, I didn't figure it out immediately, but eventually thought back on that and thought he was trying to show me how to be better, how to do better without making me feel bad about it.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“My absolute favorite ODD stories were the ones where the CFO or COO would call me over weeks and months later and ask for advice or want to see our due diligence report and really want to learn and get better from it. And so they would call me sometimes to interview employees for them or to help them negotiate deals with their service providers. So that was the true benefit. I've got some funny stories as well, certainly. I have one where I knew what the fund was doing was illegal and called my buddy at the SEC and then a few years later he sent me an article where they had they had lost their license. So that was a gratifying story, but not one that you want to happen often in your ODD process.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“Interesting. I think having done operational due diligence for hundreds of managers, I saw some really incredible operating models and really thoughtful investment teams. But the investment managers who still resist being transparent with their investors is my biggest pet peeve. Asset owners are not trying to reverse engineer portfolios or front-run year trades. They're really just trying to understand their exposure and understand their risk. And so it was really annoying to have investment managers that still resisted transparency.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think for me, it's people that are critical but not taking the risks themselves or not having had the experience themselves. So people love to sit in the cheap seats and throw tomatoes at what you're doing. But if there's a real entrepreneur that has feedback from me on what I've done right or not right with front office solutions, I'm happy to take that feedback. That's an experienced person giving me that feedback. But I get a lot of feedback sometimes from people that aren't taking any risks themselves and haven't done it. And that's a pet peeve of mine.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's anything creative. And so working at a bank doesn't always give me the ability to express this, but I love anything related to fashion or interior design or architecture, music. So anything that gives me that creative out”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“For us, the strategy is helping our clients make better investment decisions, and that can be the effectiveness of those decisions or the efficiency of those decisions. And so for me to be able to do that, I have to have a team that really truly understands the complexity of the assets that our clients are investing in and understands the demands of the investment process and how that works. And it's different at each institution, of course. Everyone has their own flavor to their investment process, but understanding the considerations in the marketplace for our clients having that empathy for our clients is something that we have to have in order to grow and to survive going forward. So my goal is to build a team that is agile and one that is going to be able to change as quickly as the market changes and one that can speak the language.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“And he was trying to figure out the impact of the pound in his portfolio. And each of the investment teams had a different way that they thought about risk and leverage. And each of the investment teams had a different way that they categorized exposure. And it took a long time to get that information back. And when it came back, it was in very different formats with very different assumptions. And so we're working with that organization to try to build something that on a daily intraday, real-time basis, they can analyze those questions very quickly.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“Risk, liquidity, and performance in the language that matters to them. So you notice in the marketplace SIMPCorp has a stronghold and SimCorp has an incredible alternatives module, but that's very accounting focused and middle office focused. BlackRock and certainly the work that they've done to acquire eFront and try to pull together Aladdin and EFRAN. These are all the same indicators, right, that clients no longer want their public markets data and their private markets data in two separate systems. These investment teams and these CIOs and portfolio strategies have to be able to speak the same language. And so normalizing the data across both the public and private markets portfolio and then having an exposure model, a custom data model for a client that can analyze factor-based investing and analyze the impact of very dynamic shifts in the marketplace on their portfolio very quickly is something that we know many of our clients, most of our clients need and want. And so the CIO came to us right off the bat of Brexit.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we are working with the chief investment officer and other executives in the organization to create a really transformational set of data and tools for them to, again, make the shift towards total portfolio allocation. So we call the product total portfolio view. We're taking two systems at Northern Trust. One, the front office solution system, which does have an incredible data model around alternatives, and combining that with the power of a system that we bought called Omnium, which we bought from Citadel. And that's the platform by which we service hedge funds and people that have very significant internal trading portfolios. And so for our investors, there's probably 200 in the world that have very highly complex alts portfolios, but also do significant internal trading, combining these two systems really gives them a fully multi-asset class middle office view of their data, but also that investment book of record that can drive then very custom views of exposure.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“I know one of the recent partnerships you've created is with one of the monster Canadian pension funds. And I'd love to hear how this is an organization that is very sophisticated, been around doing this stuff for a long time, how you've partnered with them and where that's all heading.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we've started to partner with a couple of companies, one that I think is really relevant for allocators is Accentia. You've featured Claire on your show, I think, as well, but they help managers think about behavioral nudges and behavioral trends in the investment decisions they're making by taking in transaction data and analyzing that. The same process is really applicable and helpful for allocators, right? So if you're looking at a manager and you're evaluating their track record, we would do what most institutions do. We would look at look at their longs, look at their shorts, look at the timing of their trades and try to figure out, are they getting lucky or is there actually persistence and skill in their investment process? And so that data science-based approach to analyzing a manager's track record and trying to understand what was alpha, what was beta, what was persistence and process and what was luck, that's something that we think can be really valuable for asset allocators as it is for asset managers. And so that's an example of a partnership that we've got.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“You're able to integrate more and more of the technology to get this information efficiently in the hands of decision makers. I'm kind of curious what you've seen and experienced with data science on decision making.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“System and they get a capital call from Sequoia Growth 12. We know that that's a capital call. We know that that's dated June 12th. We know that that's Sequoia Growth and Sequoia Growth 12. So we can tag that for them. And then we're also in the process about halfway done with automating pulling that nav and transaction information, capital call information off of the documents automatically and then queuing that up for entry into the systems. And then the final frontier is how do we get portfolio company information and performance information portfolio company metrics off of the statements themselves. And so we're partnered with a third party who's doing some of that, which is much more unstructured. And they had already built a set of algorithms that was incredible there. So it's really a four-piece strategy around reducing the friction as much as possible around documents. And that's one example of a huge time saver that we can create for organizations, freeing them up to do much more investment analysis and spending time with managers, which is really what.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“Down, it might be a capital call or a nav statement, and then you have to action it. And so in my prior life, we received 30,000 plus communications from managers on an annual basis. And so just the act of going out to the portals, memoring the passwords, pulling the documents down, storing the documents, making sure everyone in the organization knows what to do with them, and then actioning the action in the document, is a ton of work for these investors who need to be spending time reading and assimilating the information and understanding what to do with it. So we've been focused on digitization of alternative investments at Northern. So we've completed an effort to completely roboticize using Python and robotics going out and getting the documents off the portals and pulling them into our systems automatically. We then have a set of machine learning or natural language processing routines and algorithms that then go through and auto tag that document for a client. So if they're a client of our research management.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, I think the organizations are maturing and upskilling across the board. So we have, you were at the awards dinner recently where there was a best operations team award. That's the first time I've seen that award and we were happy to see one of our clients win that award. They're an incredible client. I would say that these are, again, small organizations that don't have management fee income, right? This is donor money for the most part or stakeholder money. And so doing more with less is sort of the theme. In terms of what's coming next, what we're aggressively focusing on is how we reduce the friction of investing in alternative assets with respect to how you administer those assets. So as you know, most of our clients are invested in hundreds of limited partnerships. And so every month or every quarter, they get a ton of email traffic from those managers. And typically the emails will say, go to a portal and get this document that we posted for you. And then you log in with a password and you pull the document.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“When you hopped into the seat a couple years ago, you had a vision for what it would take for an asset owner's back office risk systems to catch up. I'm curious both where you think you are today with your clients and then what's next on the leading edge. We hear a lot about technology in different industries and curious your thoughts of where this might head in the next five or ten years.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“Probably not. I think it's a great question. I think you have to have a certain size and scale to your organization to be able to take that approach to asset allocation. It just requires a lot more data and a lot more work. And so certainly the asset pools may look the same, but the way that the decisions are being made are quite different. I think that we do see certainly hedging and overlay programs and portable alpha programs and programs that are more quantitative or more data-driven happening in organizations that are doing the work to analyze their exposure. And I think we're seeing much more dynamic shifts in the portfolio. So while the assets may look the same, we're certainly seeing more active trading and more active hedging that's happening on a day-to-day basis. I think we have some investors who are getting incredibly smart about the way that they're thinking about their balance sheets and how they're using collateral in the portfolio, how they're thinking about leverage in the portfolio. So some of those shifts certainly are different.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“Time. Not everyone's going to make that shift immediately. It's the big sovereigns and the big supers that are doing it right now. But we believe that the data-driven approach to asset allocation is a change that people are not going to reverse. That's going to only continue over time.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“Full exposure at the portfolio and the factors that are affecting that performance and that risk, it's very difficult to manage in this type of environment. And so we are shifting our tool set to be much more holdings-based, exposure driven, allowing total portfolio allocation to happen top down by CIOs and portfolio strategists and doing that in a way that we hopefully can improve their decision making. WTW put out a study through their thinking ahead institute recently that the shift from strategic asset allocation to total portfolio allocation most CIOs or investment offices think that that could add 150 BIPs to their portfolio. If you think about that from a commercial perspective, if we can help our clients achieve an additional $150 BIPs on their portfolios, I can charge for that. We can add a significant amount of value to that organization and to that CIO. And so the entire mission that we're on right now is how do we enable our tool set to speak the language of total portfolio allocation over.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, so I think when I talk to CIOs, I'm always asking the question, and you ask it a lot on your podcast, what are you most excited about? And right now, there aren't a lot of CIOs that answer that question with investment opportunities. They're extremely excited about. I think everyone's worried about performance and how they achieve over the next decade what they achieved over the last decade. And so certainly, you know, what we're seeing are that making its way through things like adding more direct investments to the portfolio and so direct holdings in real estate and private equity and private credit certainly you can see people pushing into areas of yield they had not pushed into before but I think the other thing is that what we see is a wholesale change in the way that people are allocating assets at large and so this idea of strategic asset allocation and just having these big buckets that you are operating in doesn't work as well anymore a because the managers are never just public or just private anymore right but b without kind of understanding”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“We have over 40 clients on the platform today, and that's across pensions, endowments, foundations, healthcare institutions, family offices, and OCIOs.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, into a PE or VC backed model, I wouldn't have had that instantly warm network and all the decades of hard work our folks have done at Northern to build that reputation.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“And growing by the day. And so we have to be able to kind of push into more value added products for our clients. So that's something that it took a while to get people to see that. But I think once we started to add the client roster that we have and both custody clients and clients of other custodians, people started to see that we could really grow the pie. What I didn't expect, or one of the lessons that I learned, frankly, is I had all this trepidation about being at a custodian to whether or not we were going to be able to do this. And what I didn't realize is how much trust and respect our clients have and what an incredible client base we have. And so to this day, we've still never made a cold call to try to get business into front office solutions. We've had to gate our onboardings every single year. We've had to gate client demand because we've had so much demand for the product. And we've never had to really try to get business in the sense that we just have a lot of people that, a lot of clients and a lot of folks in the industry that know and trust northern trust. And so having, if I had gone.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“My role as at Morgan Stanley had always been focused on change, the role at Emory was very change focused. So I knew that change was hard and it never feels good day to day. It only feels good in hindsight when you can look back and see what you did. So I knew it was going to be tough, but I didn't realize quite how tough it was going to be to get an organization that has done very, very well over time to see the train coming down the tracks, I would say. So Northern has had an incredible history, incredible growth post-crisis. And I think there was a lot of thinking in the organization, like, what is she talking about? We're doing fine. We're growing, you know, incredibly well, and our clients are happy. And that was, of course, the case. But having been a client and had to have all this infrastructure outside of the custodian, I knew that there was this opportunity, this wallet share that we were missing. And so while custody and safekeeping is really important, it's a big, beautiful business for Northern, it's highly commoditized and pricing pressure is significant.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so we built a team of designers, developers, operations professionals, sales and marketing all within one team. And that one team and being on one mission and feeling like one organization, I think made all the cultural difference that we needed to make in order to fight some of the fights we had to fight with the bank because we were on a mission to stand up this new business. And so we've learned a lot of lessons. The bank has learned a lot of lessons about innovation within the bank as a result of the journey that we went through. So it wasn't easy, but I think the path has now paved for other businesses within Northern that we'll have to travel that same road.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, it would be disingenuous to say it was easy or straightforward. Custodians don't typically build businesses from scratch. We're not a build it. They will come type of growth organization typically. And so we have these large legacy systems that we tweak and evolve over time.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“Banks had partnered with my competitors. What I knew about my strategy going forward is that I wanted control of the value to the client. I didn't want to give that up. And so it was much more expensive, it was much more difficult. We got to market later than we wanted to certainly. But I now have control of the asset and control of the value to the client. And in the other cases, they don't have that control. They didn't do the work to build that asset. So I'm happy with where we are now, but certainly lots of sleepless nights. I had never been an entrepreneur, and so we call it entrepreneurship, I guess, but it was scary for a while.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, for us, it's the people and it's the service offering. So we're not a technology company trying to do some service and trying to understand how to operationalize. In fact, the capital structures of most of these VC-backed fintechs are not well suited to offer operational services just because the revenue and margin looks very different, right? So I think it's the people, and we talk about the strength of the team and the experience that they have. And so from a technology feature and function perspective, you can line that up. But if you're not with a partner that can help you get the data into the application and make sure that it's correct and understand your book and understand your assets, you are not well positioned. I think what's happened over time with the two competitors that most kept me up at night in the early years is they've both been bought out by larger strategic investors. And so for a long time at Northern, we were taking a very different approach from our competitors in the bank space because we were spending so much money building our own capability.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“Difference in the efficiency of his decisions, but certainly hopefully the effectiveness of his decisions as well. So we're doing a case study with them right now on just the time difference that it takes to make the decisions that they used to make. And I think that's going to be a really fun one to get out in the public pretty soon here.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then certainly they've served as an incredible reference going forward. So that was a case where a new investment team was creating an office for the first time and had no technology in place. And so we were able to provide them a lot of different capabilities and then also provide their middle office for them out of the gate. I think there are other clients where they have come off of these decisions where they had multiple different applications. And so they thought they were getting the best private markets application and then the best performance application. And then what we see as clients who do that tend to realize, just like they're investment partners, they don't want hundreds of investment managers, right? They want stronger, deeper relationships with fewer investment managers. The same thing is happening on the service provider front. And so we helped a large healthcare organization migrate off of a couple of different systems that they were using. And so when we talked to the CIO just recently, he said instead of taking days or weeks to get to the information I'm looking for, I can get to that information in minutes. And that makes a meaningful.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah. I mean, so we tend to have two flavors. I think our first client out of the gate, really our second client was one of the world's largest family offices. It's an incredible client to work with. They have such a thoughtful and experienced team. And the most interesting assets that you could imagine. They were spinning out of another organization. And so they were sort of starting their infrastructure from scratch. And so we weren't converting off of other systems as much as trying to build the history of their book. And we did that north of $100 billion in assets and did that for all the family members and the different legal entities that they were invested in and then all of the complex direct investments as well as funds and public markets investments as well. So in hindsight, probably not the wisest to have your first major client be one of the largest and most complex in the world, but it helped our team really stand up our service offering.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“We would have had the solution that we needed. And so I knew going into the role at Northern Trust that I wanted to buy or to partner with Parallox. We were not interested at the time in taking outside capital. Were not interested in being bought out, but we continued conversations just because we had a very like-minded way of the way that we were approaching the market. And so as we were researching what it would take to build a solution, I finally convinced the founders of Parallax to let us buy the company. And so we did that about a year later. And that has formed the foundation of the data model and the technology that we're offering, but we've done a lot on top of that to really modernize the user experience and then also add the service team. So part of what we've done is recognize that it's not just a technology problem. You can throw as much technology you want at the solution, but you have to, given the complexity of these assets, have people that understand alternatives and how they have to be accounted for and the unique characteristics from a performance or analysis perspective. So we have built a team of people to help our clients co-source some of those data management and operational activities so that we know the data is of high quality.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I was ready to have to build it. We certainly had some competitors at the time who were just creating their businesses and starting to nip at my heels. So I knew I wanted to get to market quickly. I knew that the insight that I had coming in from an endowment would be really powerful for us as a firm. And so I knew exactly what I wanted to build. About a month before I left Emory, I had a phone call with a peer and she said, I'm about to make a choice for a technology provider. And I'm just not sure it's the right one. Could you call them and do some due diligence for me? I know that you know this space really well. And it was someone I'd never heard of. But when I looked at her RFP, they checked all the boxes of everything she needed and they were about half the cost of everything else she was looking at. And she was having to combine multiple systems together to get to what this company could do. And so I called them and I remember very vividly speaking to the founder of Parallox Investment Technology at the time and putting my phone on mute at Emory and saying, why am I even quitting my job if I had just found this company prior?”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“When you went in to do this, you knew it didn't exist. There's always this buyer build question. And I'm curious how you put this together to get to the point where it would work, both public and private.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, the core tension between asset owners and custodians right now is that over the last few decades, custodians really were the books of record that most asset owners were making their decisions from. But accounting books and custody books are not really fit for purpose for making investment decisions. And so they're meant to be monthly. They're meant to be settlement date based. And as asset owners and allocators started making more investment decisions in-house and started doing that more frequently, those books of record just become stale and they become insufficient for the needs of the investment team. And so what we're seeing on a wholesale basis, what we did with Front Office Solutions was try to provide what we would call an investment book of record for an allocator. So they're not coming in for the most part and trading right every morning on a set of positions like an asset manager would be, but they need a daily updated view of their portfolio across risk, liquidity, performance, exposure.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, sure. So the first four or five years at Northern were spent focused on building and launching front office solutions. So we have north of $450 billion on the platform now. We launched about three and a half years ago. Some really incredible clients across the pension endowment healthcare family office space. And so earlier this year, I was given responsibility for the overall asset owner business in the Americas. And what that means is all of our corporate clients, insurance companies, endowments foundations, healthcare institutions, public pensions, as well as our multinational government organizations. I have that overall business in Northern It's about half of Northern's assets under custody at large, and it's about 20% of the bank's revenue. So it's a really big important business for Northern. And one, as I mentioned, we've had an unwavering commitment to. So any client that gets custody, accounting, performance, analytics, banking, and credit, or asset management services from us that falls into that category is with us.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“I wanted to make sure that I was going to do this with an investor that would take care of the business that we wanted to build. And so Northern has had an unwavering commitment to asset owners for 100 plus years. And so it made sense to do that as terrifying as it was to think about going to work for a custodian. That's what I did. And so I left Emory and started what we call front office solutions at Northern Trust.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“Time with me to talk to me about that. And I said, sure, I'm happy to, but I just want you to know a year from now, I hope to be eating your lunch. And so he said, no, like come do this at Northern. Let's think about how we would seed you like a venture investment, basically, stand you up with capital and creative control and the ability to build a team and build a business around this idea. And he saw that vision really early. Michael Grady, our CEO, saw that vision really early. And so I joined Northern My fear in having done this with a private equity firm is that we would end up in the wrong hands. This particular fund was a buyout fund. It wasn't a growth equity fund. So I knew that we were going to get flipped at some point. And I was really worried that we would get flipped to a larger or more strategic buyer who would throw away the niche aspect of what I wanted to do for allocators. And again, allocators kept getting investment manager hand me downs or they kept getting in bed with firms that would really service their asset manager clients before them.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“It still was the most amazing job when I left. There were lots of tears and nervous moments involved. I think somewhere along the way, I just became passionate about creating a new solution for the marketplace. And really something that I would have wanted to buy myself having been in that seat and something that I would be proud to go back to my friends in this endowment and Falmation community and sell them. And so I started shopping the idea around, I spent a ton of time, probably a year really talking to all of my peers about the idea that I had getting feedback from them. I ended up with a term sheet from a large private equity firm that had just bought a hedge fund administrator. And so the idea was that they would kind of bolt this on to their investment in a hedge fund administrator. And so we agreed an asset allocator specific offering. And I was very close to taking that offer. Came across the now president of Northern Peacher, which my boss. And he said, I'm looking to try to figure out what we need to do next for asset allocators. Can you spend some time?”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so we implemented some incredible technology and we shored up the operations and tried to make the data quality as great as possible. So when I got there, the operations team was much smaller working on much older tool sets and doing everything very manually. We didn't have a lot of maker checker rules in place. The investment team would be very frustrated at the lack of data quality that they were working with. And of course, if you make a bad investment decision off of bad data, there are big consequences for the institution. The first thing was really to kind of shore up the data quality and upgrade the system. So we upgraded and had some really great systems in place, but we still had five or six different systems that had to be pulled together every time an investment decision really needed to be made across the portfolio as much as every institution has some sort of permutation of a CRM system and a performance system and a risk system in some way that they're tracking liquidity and they have a custodian they still are responsible for shipping data”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so I would walk naively into Harvard or Stanford or Yale, these institutions that are so well respected in the industry and doing amazing work, they were still struggling with their tool sets as well. No one had figured it out. And so I did the work to start to try to work with our custodian at the time. We transitioned to a different custodian. So we became clients of Northern Trust. And I really desperately wanted custodians to try to solve this problem for asset owners because we already had 80% of the data. It was so close that we could make that leap to service the front office as well and eventually just got to the point where I thought we have to be able to do better. I can do this. I know how to build systems. I know how to build operational models. There's nothing too complex about doing this. It's just that no one had really serviced this part of the industry in the way that they deserve to be serviced.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, I was super naive. I think I had grown up with amazing technologists and engineers, anything that we could dream of or conceive of we built. And there were vendors, you know, that we used certainly in the landscape at Morgan Stanley. And so when I got to Emory, I thought, well, maybe they just haven't had the experience or they just have never implemented systems before. And so they just haven't found the right one. So to take a step back, my mandated Emory was threefold. One was to institutionalize the operations of the portfolio, really make sure from a risk and legal and compliance tax audit perspective we were doing what we needed to do in an institutional class way. Two was to create an operational due diligence program across both asset classes, so both public and private markets, which at the time not a lot of people were doing ODD on private equity. And so that was really fun to establish that. And then the third part was to buy or build a technology stack that would meet the needs of our investment team, who coming out of the financial crisis, like most other institutions, were really struggling with understanding.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source
“Information with people that were new to their institutions and their jobs, but that was really an incredible part of that role.”
2022-11-17 · Capital Allocators · Melanie Pickett – Modern Technology in the Investment Office at Northern Trust (Capital Allocators, EP.281) · IDENTIFIED FROM THE TRANSCRIPT · source