Go ahead and get started. So next up, for a session post-lunch, we have a Northern Trust. From Northern Trust, we have David Fox, Chief Financial Officer, and with David, we also have Michael Hunstad, who's the President of Northern Trust Asset Management. So thank you, David, Mike, for joining us. And I believe, Mike has some prepared, a few slides and remarks to go through, so over to you, Mike.
Yeah, great. Thank you. I want to talk just a little bit about the asset management business at Northern Trust. You undoubtedly heard a lot about our wealth management and our asset servicing business, but I want to stress that, you know, there are literally hundreds of asset managers that are in this space, but only a very small handful are in what I'll call the trillion-dollar club. We are privileged to be in that club. We are one of the largest asset managers in our own right in the industry. So why haven't you heard more about us? Well, we've had this great brand name, jewel of a brand name in Wealth Management. We have $18 trillion in assets under custody. Admittedly, we are kind of a piece of the business, but a piece of the business that you don't necessarily hear a lot about.
So just by the numbers very quickly. Again, $1.4 trillion in total assets. A lot of times I get the comment, "Well, is that not predominantly passive assets?" And we are one of the largest passive providers in the world. There's no question about that, both for equity and fixed income. We've got more than $300 billion in our liquidity platform. But one thing I want to stress is that we go well beyond the passive dimension. Almost 40% of our assets are in the active space. We have a robust alternatives business under the brand name of 50 South Capital. We do private equity, private credit. We have a great secondaries lineup of products. And we do a lot more than that. We do co-invest, hedge fund to funds. It's a terrific business, terrific track record. I'll talk a little bit more about.
but also in the active dimension, fixed income, high yield, ultra short, multi-asset. We're big in the multi-manager and the OCIO. We're actually one of the top three tax-advantaged equity firms in the world. We've got a 35-year track record. We're doing a lot more in that space going forward. So, a lot in the active side. I didn't even mention a $50 billion quantitative strategies business where we showcase our capabilities in AI and alternative data. We built one of the best technology stacks in the business. The point is that we are a lot more than a passive manager. We're also much more than just a U.S.-focused manager. We have global footprint, 16 locations physically, but clients in many, many more countries around the world, and premier clients. In the U.S. and the U.K., we have a lot of insurance, a lot of pension.
Australia, we're very, very large in the superannuation space, increasingly around the world, sovereign wealth funds, sovereign pension funds. We just signed deals within Saudi Arabia, with two major clients, for both our passive business but also our quantitative strategies business. So, very, very large footprint, very large client base. I think the thing that makes us very unique is the way that Northern Trust is structured. We have this tremendous wealth management business that asset management has been servicing for more than 25 years. We can create product, we can incubate product within our wealth management practice. We can then take that product and distribute it into the intermediary space. Platforms, wirehouses, RIAs, if we have product that's well designed for the wealth channel, that should very much play well in the intermediary space.
So we design for wealth, we distribute with an intermediary, but we can also scale through our institutional connections. Asset servicing is a great partner in that regard. $18 trillion in assets under custody, a lot of that is asset owners. Those are the same clients that we're going after. Our position within Northern Trust, I think, makes us very unique in the product development, but then distribution capabilities also. I think we're very, very well positioned and uniquely positioned, to take advantage of that going forward. A big part of our strategy. All right. That's a little bit about what we do. We talked about asset classes, but I do also want to talk a little bit about vehicles. We're known for our mutual fund platform. We have one of the biggest CIT platforms in the business.
We're very big in the DC space, but we go well beyond that as well. So internationally, whether it's our UCITS or FGR funds in the Netherlands, our AUTs in Australia, we have a lot of capabilities in how we actually wrap our products, and two that I want to highlight today is our ETF platform, as well as our custom SMA platform. So in the exchange-traded fund areas of business, we have been in this space for more than two decades. And we were early in the call it innovation around alternatively weighted indices, now going more in the active space and in the core space, and I'll talk about that in a second. In the custom SMA business, we're one of the top three in the industry in terms of the assets that we manage. So that format or that vehicle being very important to us as well.
So when we think about growth going forward, it's a combination of product and vehicle. ETFs is a fast-moving river, double-digit growth expectations going forward. We're going to double down here as well. We already have scale. We have great clientele. We have access to intermediary platforms. We co-develop our product with wealth, a key area of emphasis, alternatives, 50 South Capital brand name, obviously a double-digit growth area as well, 25-year track records, great performance, great team, great process, great capabilities overall. And then finally, custom SMAs where we're thinking about how do we take everything that we do well and make a bespoke solution for our clients. Again, a double-digit area of growth for the industry. We have the right to win. We're top three, $150 billion in assets, and we're growing every single year, a 35-year-old track record.
So our achievements in 2025 that are going to carry over into 2026, ETFs, we launched 11 really creative ETFs this year in the latter part of 2025. When we think about our clients and what they need, a lot of them want an annuity kind of cash flow stream but don't want to lock their assets up into an annuity contract. We launched laddered fixed income ETFs, both municipal bond as well as tax advantage or TIPS, to be able to recreate those cash flow streams, for a specific need. On the alt side, we've increased our fundraising more than 2.5 times year-over-year. Significant investments across the organization. You're going to see more from us in that intermediary space as well. Custom SMAs, more than $5 billion in asset gathering in this space last year. We've extended into new channels.
We're doing a lot more in the long-short tax advantage space also. And then finally, I'll just mention this because this is happening yesterday in liquidity. $35 billion in growth last year, which was a fantastic year, 12 consecutive quarters for asset growth. But just yesterday, we launched our first tokenized share class, of our treasury-only fund. So some great innovation. So a lot of product launches in 2025, a lot more to come in 2026, but just wanted to give you a taste of what the asset management business looks like.
Thank you very much for that. Maybe just to follow up on that, Mike, you took over the business last year, the leadership of the business. Just talk to us when you think about, like, when you laid out, like, the right to win across ETFs, alts. One, just looking back over the last 3-5 years, was there an aspect around execution, be it sort of manufacturing product, distribution, or just speed of execution where you thought things could have been done better? And, like, where do you think we should expect the biggest changes go in a go-forward basis relative to how this business was run over the last few years?
I would say innovation and speed of launch are two really critical components of that. Prior to what we did late last year in the ETF space, we hadn't launched an ETF for several years. The platform had been kind of what it was for a long period of time. We need to speed up our product launches, but we also need to be more innovative in what we do. Another happening last year that I think is sort of part and parcel to that is, we acquired a team in Amsterdam and the Netherlands that is focused on really AI and alternative data within the active space. Our active strategies in equity and then increasingly in fixed income, utilizing these disparate data sources, very unique kind of alpha drivers.
We're just rolling that out into products late last year and early this year, starting to see some great, new mandates come out of that as well. So, speed of launch, but also innovation are going to be really two critical dimensions.
Got it. And so similar to, I think you mentioned the team in Netherlands, is part of when we think about just execution, the speed of it, do you need a lot more external talent? I'm just wondering what investments does it require, either from an intellectual capital perspective or from a technology perspective, to really get to the goals that you have?
Yeah, so let's talk about both. On the human capital side, we spent the last several years, really increasing our heft within the investments function. We brought a lot of new talent from the outside. We have also restructured some of our investment teams to be more aligned to their go-to-market strategies. So that, I think, is work that is now paying off, so to speak. On the technology side, though, I think this is a little appreciated but very important aspect of our business that, I would say unambiguously that the asset management, Northern Trust Asset Management, has one of the best tech stacks in the business.
And what do I mean by that is, like, yes, we, you know, Aladdin is our centerpiece, but, we have created so much around that centerpiece in terms of cloud enablement, in terms of, making sure that we have access to all the data sources from, whether it's our fundamental data vendors, our index providers, our own internal accounting systems, more or less, we're getting to the point where everything will be cloud-enabled. And not only cloud-enabled, but having the kind of that seamless data flow. So why is that good? That's good because it allows you to scale your business in a couple of important ways. One is just you can you can do more with less resources, and that's great. But the other is you have the ability to customize at scale.
This is something that Northern Trust is very good at, creating bespoke solutions for our clients. And again, we have this big custom SMA business, but allowing us to do so with a technology enablement that means that we can preserve our profit margins, and still take on all these bespoke implementations.
Got it. I guess maybe zooming out a bit and, David, for you, as we think about some of the strategic priorities for the firm, be it, optimizing growth, driving productivity, resiliency, just talk to us. I mean, I think you took over as CFO late 2024, and there were a bunch of leadership changes around that time. When we think about the three strategic pillars/priorities, what changes have been instituted over the last couple of years, that have put Northern on a better path for growth, profitability, and all of that being resilient?
Yeah, thanks for that question. You know, I would say the main thing is the creation of the COO function and centralizing a lot of the best practices across the firm within that COO function, bringing some of the stuff that had been done in the silos towards the center. The one Northern Trust effort that we had generally inside the firm feeds both our growth and our productivity. So if you think about, and I talked a bit about this at the fourth quarter earnings call, when we think about our financial plan going into the year, we actually don't start with what's my expense growth going to be in the year. We talk about what's the productivity going to be. And everyone has a productivity target and a KPI.
Based upon that, how much money do you think you can invest in in-year expenses, and how does that inform your overall expense growth tolerance? So that's the way we did our planning. It's a very different way of doing it. Everything is integrated: your capital spend, your investment spend, your productivity spend, and your expense spend. We made it much more dynamic. So you've got these, you have the ability, I think, when you do it that way, to be more flexible in terms of where you put your money based on where the markets are. Then you have the ability, through the One Northern Trust part of it, not just in the operating side that Peter Cherecwich is doing, but also on the business side, to think a little bit about mining those seams between all three businesses.
And just thinking a bit what Mike just mentioned around the ETF creation, getting informed about new product creation through ideas that may come out of the wealth management business, talking about alternative investments, not just from the perspective of advisory on investments, but all the best-in-class fund administration and asset servicing that we do around that particular space, which is really best-in-class. And so you combine all that together. It creates a lot of opportunity for growth and productivity on top of what is now a very resilient tech stack. So they all kind of are intertwined.
Got it. And I get your point in terms of thinking about productivity as opposed to just expenses, but it's been a huge focus in terms from an investor standpoint around expense growth and outlook, and it has been drifting lower, the pace of expense growth. Just give us a sense of the top two or three areas of investment spend today, and then what are the offsets when you think about just opportunities to save within the bank? Are you getting efficiency gains or cost savings?
Yeah. Well, listen, I mean, our two most important areas for spending, obviously, are still going to be the infrastructure of the firm is incredibly important and making sure that that infrastructure, through the technology space, is done in a way that enables the businesses to grow. And so we have technology spend that is business-driven. We have technology spend that is, you know, the foundational technology of the firm. But I would say at least 50% of what we're doing on technology is going to be around growth and around business enablement to be able to grow those platforms going forward. If you think about the growth, though, from the pure client side, we're leaning very heavily into both wealth and into asset management.
So if you take a little bit of a look at what Jason's doing on the growth side for wealth, we talk a lot about, you know, family office solutions and family office. We're taking what we learned from the family office space around how to run and operate a family office and moving that into a different cohort, segmentation. Someone with, let's say, on average, $100 million-$750 million, but they don't have the critical mass really want to form a family office. They want to do all the same things and get all the same services that you would get within a family office, but they don't have their own family office. So what do they do?
They want to turn to a firm like a Northern that basically creates a virtual office for them based on the knowledge we've gained from having serviced a lot of these large, big clients in the family office space and recreate that experience for that individual family. They're going to own the same number of houses. They're going to have the same bill pay issues. They're going to have trust and estate planning and taxes and all the different things that you would have within a family office. We found that by incubating that and trying to take what we had done in the central region already and pushing that into the various regions across the country and covering that client base on a different segment, that's going to be a large investment that we have going forward.
And then Mike's talked to, you know, about some of his growth initiatives already. I don't need to repeat those. But when you think about where we're leaning in, it's really going to be along the wealth and the asset management side.
Got it. And then we think about the other thing just at the top of the house, you kind of nudged your strategic targets higher with the last month. Now, Northern had a very good 2025, ended the year on a very strong note. When we think about just the pre-tax margin for the business, the ROEs, are we just structurally rebasing to a higher level where some of these targets might be a little bit more of a floor as opposed to something that you're looking to achieve?
No, I mean, we put the targets together as medium-term targets. So medium-term means things to different people. For us, it's, you know, a 3-5-year target. And I think the idea behind it was to say we want to reach a state where through all the cycles, we have the ability to maintain what we think is a healthy margin, let's say 33%, right? And so where we are now is we're trying to change the business mix to be much more geared towards wealth and asset management, which already have margins well above that target. And then we're also refocusing our efforts within asset servicing on the asset owner population where almost all of the new deals we bring in are already at or above that target as well.
And so as the business mix changes through time, combined with productivity, we felt it was the right time to lift the medium-term targets. And when I say through the cycle, we obviously can't always rely on market lift and NII. So you want to have the ability to maintain those targets in a sustainable way going forward. And so that's why we raised it and that's how we think about it.
Got it. Maybe just talking about the market, maybe starting with from an NII standpoint, just does the interest rate backdrop, like rates staying structurally higher, make life easier from a balance sheet management standpoint?
Yeah, absolutely. Yeah, I mean, the higher rate environment, clearly we've modeled in, when we talk about our guidance, we modeled in two rate cuts for the year. And so we know what that sort of means, generally speaking, in terms of the headwinds we've got to try to make up for. And we've made up for it in our view, in terms of our deposit pricing, which we haven't lapped. We started putting a lot of that new deposit pricing in place at the middle to the end of last year. So we haven't lapped that yet. We have a lot of securities rolling off. We can reposition at higher rates. We're leaning into alternative investments as well, whether it's FIC Repo or other types of things that we can do.
So there's other mitigating factors we think we can take during the course of the year to basically counteract what might be 2 rate cuts going into the year and then give you the guide that we gave you around NII. And so we feel pretty good also about our deposit growth. Our new client pipeline's very good. Deposits tend to grow with a new client pipeline. And so we, you know, it's a concerted effort across all the different inputs that you've got going into it to make sure that you can maintain that. And really, at the end of the day, not to oversimplify it, is, you know, you want your liabilities to reprice faster than your assets, right? So you're looking more at fixed rate and you're just managing that against what you can do on the liability side actively.
Got it. On the assets repricing, does that run its course this year as we move to 2026? Or will there be a lot left over?
There's a lot of, no, there's a lot of repricing that happens every quarter. And obviously, a big maturity coming in the fourth quarter as well. But no, there's, you know, there's a healthy amount every quarter that gets repriced that we can redeploy into higher yielding opportunities.
But does that benefit come to an end at some point later this year? I'm just wondering, what's the duration of that book?
Well, the duration hasn't really changed. Our book, our book, our securities book is still very low duration. It's like a year and a half. And the balance sheet duration is less than one. So we haven't really changed it that much. So that gives us a lot of that flexibility. And of course, now with the yield curve looking more upward sloping, that obviously helps in terms of your ability to reprice as these things roll on. Right.
As you look at sort of the outlook, you mentioned your 2 rate cuts baked in. What would be the biggest risk to the NII outlook? Is it more about like deposit growth being more challenging or more rate cuts than expected?
Yeah, our NIM doesn't start to get compressed until you get to rates that are sort of in the twos. Right? So we don't really have any concerns about going into that level. And obviously, there's a Fed change and everything else, but we don't see a move down that low this year. And so from that perspective, it would have to be something around either business growth or deposits, which we don't see either in terms of a headwind. But no, I think at the end of the day, we feel pretty good about the first half of the year in terms of what we can see. And then the second half, of course, is going to depend on the macro environment.
Got it. Maybe just going back to the One Northern and the productivity improvement, are there aspects, like what are the areas where you're actually getting savings or cost cuts that are helping fund these investments?
Yeah. So we look at it in three ways in productivity. We look at workforce, we look at vendor management, and we look at process improvements, right? So, you know, on the workforce, we've been looking a lot at span of control. So that meaning that how many managers, if you have a manager in a particular position, how many direct reports does that manager have? Do you have too many? We have KPIs we've developed for every group to reach a different level of span of control. We like to say eight is great, right? So a manager has eight direct reports, good thing. If they have one or two, not so good. You got too many managers.
We're also leaning into tier one and tier two and tier three locations and saying, if you have a replacement post that's coming up, are you going to replace that post in your tier one location or could it be better served or equally as served in a tier two or tier three location? We've got metrics around that in terms of how much you can replace in a tier one versus a tier two versus a tier three. You know, on vendors, we're consolidating our vendors. We had very much of a federated system around vendors. I talked about the creation of the COO office. We are going to be doing less vendors and more with those vendors to try to get more economies of scale through those vendors. We have centralized procurement as well. So we've got all that in one place.
We've insourced some activities we might have typically taken out. And then we're looking at outside consulting and contractors very carefully. Contractors, by their very nature, are 20%-30% more expensive than an existing FTE. So we're taking a look at that contractor count as a total workforce matter and trying to work that down to a more manageable level. And then on process improvements, we're trying to just automate a lot of the manual stuff that we do. And that's where AI kind of comes in. When you think a little bit about that, you know, our client-centric capability model where we're centralizing a lot of those functions and trying to just weed out what might be too many hands on too many manual processes as part of that. So all of those things combined are driving a lot of the productivity.
Maybe just talk to us about AI in terms of, especially in the asset servicing side, like are there, what the use cases have been thus far and just how big of an opportunity does AI-driven efficiency present in that business?
Yeah. Here's how I would describe AI inside of the company. Our first goal with AI was adoption. What we did is we rolled out Copilot to every member of the employee base. With that adoption, what you get is a lot of experimentation and use cases that you can actually apply to your business. Right now we have a backlog of 150 use cases. We can't prioritize all of them. We're sifting through them all and saying, okay, which are the ones that are going to produce either the most productivity or the most revenue growth? That being said, asset servicing is a great area to look at because of all the manual stuff that they're doing. They're already using AI for document digitization, new client prospecting.
I mean, if you think a little bit about sifting through what clients you're going to go after, but also responding to RFPs in the asset servicing space in particular, there's only really three providers, sometimes four that they go out to get a bid. The RFP documents are very voluminous and very detailed. It can take a long time to fill them all out. If you use AI, you can reduce that time significantly. GitHub, right? We're already using GitHub Copilot for coding. I mean, that obviously saves a lot of time. You need less programmers. You can do a lot of that on your own. That's pretty impactful.
And we have our NT Byron, which we've rolled out, which is our own internal AI engine that clients can actually, and I say clients, employees inside the firm can use to create their own agents to do some of the tasks that they're doing. So early stages, adoption really good, a lot of use cases already being used. We're even like scrubbing email. Right now we get instructions over email and fax. AI can go in and scrub all those and put a summary together so you can get client queries and respond faster to your clients. So I'd say on the productivity front, it's already having an impact. But the use cases have just begun. So I think the upside potential is enormous.
Got it. I guess one last question on all things productivity. I think in the past you've talked about you want to structure the bank such that if the revenue environment is tough, you can still mitigate that on the expense side. By when do you think the bank will be in a spot where you feel confident about being able to achieve that? Like are we there yet already or like is there a little bit?
No, I think we're there. Yeah, I would say we're there. We have the discipline and we know what levers to pull. And unlike in the past, where it's not reactionary. So what we do is we have a contingency plan already in place in terms of what levers we would need to pull if the environment were to not be where we want it to be. And that's pre-agreed and vetted through all the business units and all the corporate functions so that no one gets surprised, right? And then we scaled all of our investments by mandatory and then discretionary so that we know which ones we absolutely have to do either from a risk and control perspective or an end-of-life technology perspective. And the discretionary piece, we know exactly what they are and what we'd stop doing. And so that process is in place.
It has been inventoried. We know if we have to pull the lever, we will. We really don't really hope we don't have to. That discipline's there. It's not like it's going to be, oh my God, what do we do? The markets just went down 10%, right? We have it in place. We know what we're going to do. I mean, there is a point at which no one can, if rates go to zero and the markets go down 30%, all bets are off for everybody, right?
That makes sense. Helpful. I guess maybe Mike, going back to you, when you look at sort of the strategic priority areas that you have on this slide and the product launches in 2025, like is the expectation here we're going to see the growth rates increase in 2026 and 2027 when we think about new product launches? Like just how should we, if you can frame that for us?
Yeah, absolutely. So part of the objective is, you know, you all know us or know the asset management business again, primarily for probably index and liquidity. Those are our two big product areas. So part of the objective is to, again, lean into those faster flowing rivers, so to speak, higher growth areas, but also diversify our product set. Meaning that if we're too overexposed to liquidity and that has a macroeconomic sensitivity, that's something we're going to want to diversify away from. So these areas are relatively uncorrelated to each other, if you will. Alts and ETFs have very little correlation, so to speak, but are also high growth areas where we have the right to win. So are we going to accelerate? Yes, absolutely going to accelerate. More product launches, more investment of capital.
These are the areas that we've been in that space for a great period of time. We just want to make sure that we can project that out into the market and be relevant outside the bounds of Northern Trust.
Got it. And you mentioned launching the first, I guess, tokenized share class. Just talk to us, like I've heard competing views around what tokenization means, what it's trying to solve for. Like just in your world, like what do you think tokenization is solving for and what's the opportunity set there?
Yeah, I'd say it's kind of ironic that the industry went down the path of tokenizing, what you would say is the most liquid asset class there is. But there's a great use case for this in that more and more our clients are looking to use tokenized money funds, especially treasury-only funds, as collateral or derivatives contracts. So there's a very specific use case in the tokenization of these kinds of funds for that application. I think this is just the start. There will be more going forward and we will be right there on top of it. But this is a situation where we have a treasury-only fund. It's got more than $10 billion in assets. Clients came to us and say, "Hey, I want to pledge that as collateral. We need a tokenized share class because that is more tradable.
It's 24/7, 365 essentially in terms of trading activity." And because it's so fungible, more and more that we can pledge that as collateral. So that's very specific going forward. I would say the industry is evolving in the specific use cases of tokenization. But I would say for the time being, within the cash management space, within the liquidity space, we're going to see more activity there.
Got it. I guess, David, you mentioned about, I would just add on the tokenization front, just on the asset servicing side, you know, we have a concerted effort around making sure that our infrastructure is built in such a way that it can accommodate, it would be chain agnostic. So it can basically report on tokenized assets the same way we report on any other asset. And our clients, being the client-centric firm we are, are going to be pushing us along that curve to make sure that we keep up. And so big focus also on the infrastructure of asset servicing around tokenization as well. Understood. And maybe just moving to the wealth management and the global family office business, you mentioned what Jason is doing there. Just talk to us around what are the hiring plans there?
Like when we think about the growth sort of cadence of that business, what's going to be driving that growth? Is it bringing on senior bankers who bring in books of business? Just how you're thinking about the growth outlook this year, but over the next 3-5 years?
Yeah. So I think if you think about the family office solutions, which I think some folks have been a little bit confused as to what that means exactly. I tried to explain a little bit at the front end, but the type of portfolio manager that we've got in the regions could have on his plate in the past, you know, a $10 million client, a $20 million client, and a $250 million client, right? So the issue really isn't that that individual is not capable of doing all three, but at the end of the day, what do most people with $250 million want to know? They want to know what people like them are doing, right? So that's why the segmentation has worked so well in family office.
We feel that that segmentation is going to work well as we push it out to the regions. We don't have the same group that we've got in the central region seated into some of the key markets that we've got. When you look at what Jason's going to be doing around hiring, he's going to basically be trying to replicate what we've got in the central region in key markets like New York and California and maybe Texas to make sure that we have that center of expertise in those markets that will involve some recruiting. It might involve some reshifting of priorities among certain bankers that already have that capability. At the end of the day, we think that segmentation drives greater success.
We find that when you do that, our win rate goes up above 80% because you're just providing a whole series of services you would not get from just a basic wealth manager in those markets. So it's going to be super impactful, we think, as we spread it out to those larger regions.
How easy or challenging is it in terms of spreading that out? Is it like, what's the governor on that, the pace of that spread out? Is it finding the right talent?
Yeah, it's finding the right talent. I mean, I think Jason's got it in his 2026 plan to really build that out this year as quickly as he possibly can. And so that's just going to depend on availability and resources and things of that nature. But I think a lot of folks want to be part of our platform as it relates to that particular segment because really nobody does the family office segment the way we do it in terms of holistically looking at the entire continuum of services offered to a family office client. And applying that to the family office services segment to run a virtual family office for a client, you need to have that knowledge base. Most folks, when they talk about family office, they just think investments. It's much, much more than that, right?
And so I think that from that perspective, what we offer is differentiated and you have to be able to have that expertise. And by the way, they can currently draft off of all that knowledge we have in family office. So it's not as if they have to make it up. I mean, at the end of the day, we have all the knowledge. We're going to get a lot of seats and chairs to make sure that that happens. But at the end of the day, the knowledge base is there and the procedure for going about doing those clients and advising them is already there.
Is that focus mostly U.S.-centered when you think about this year or in major?
Yeah.
Okay.
Yeah. I mean, the family office, the family office group is growing internationally. They're the only group that has an international platform right now. The family office services segment involves a lot of other product that we don't have internationally right now, right? When you think about, and of course, tax planning across different jurisdictions is different. So you've got to be specific to those particular jurisdictions. So no, it's really primarily domestic.
Okay. Just outside of that, from an international standpoint, like where do you see sort of growth momentum? Where's the energy in terms of across the business?
Yeah. So we've been really successful in Europe and the Middle East, the EMEA countries in general. A lot of the asset servicing stuff that we do for our clients, our sophisticated clients in the private investment space tends to be applicable to some of our family office clients, particularly the Luxembourg structures that we've been using. So we've already got momentum in that regard within Europe, within the Middle East. We did set up an office in Singapore. There's a lot of, obviously, money in Asia we're trying to capture. That market is a bit more fragmented. I would say the family office growth there is still in a relatively, compared to the U.S. and Europe, in a much more nascent phase and how you define a family office.
So the amount of targets that we have overseas in Asia tends to be a little bit smaller because they don't have the large sophisticated offices that have really been built up in the same way they have in Europe.
Got it. I guess we have two minutes, maybe one last question just around capital allocation. Just talk to us in terms of, one, I think from a regulatory standpoint, we had a panel earlier talking about changes to liquidity rules, Tier 1. So I'm not, so from your standpoint, is there anything on the table or being considered that could make a difference in how you allocate and manage capital and/or liquidity?
No. I mean, yes and no. What I would say right now, nothing's changed. So the rules are all the same. We still have a target of 11%-12% CET1. We're well above our minimums in liquidity in CET1. I would say we're probably leaning more into inorganic than we ever have before. So when you think about M&A, we want to have some dry powder around for that. If there's something to do on the distribution side for Mike or something to do with Jason in terms of filling out geographies or other capabilities, we want to have that capability. We still are very liability-driven as an institution. We have very large clients that come to us with very large needs. So we're always going to have a capital buffer, right? That we have, we can't predict RWA, you know, and so it's really hard to do that.
We want to make sure our balance sheet is really open for business for all of our clients all the time. My guess is depending on if other folks shift down their minimums, I think Northern is going to take a very conservative approach to that and make sure that we can still return capital to our shareholders the same way we did in 2020 and 2025, but at the same time be able to have that buffer because our clients expect us to have that when it's available.
And then you talk about inorganic, you mentioned this on the earnings call as well. Frame that for us. Like what does it mean? Could it be like large transactions that could be somewhat transformational? Like just how would you put a framework around what would be a good deal for Northern?
Yeah. We're going to stick to our knitting, right? So it's going to be something in asset management or something in wealth. And it doesn't have to be an outright acquisition. It could be a partnership or it could be a distribution agreement. We're going to be very disciplined. You know, it's a very high bar. And given some of the valuations, particularly on the wealth side, the attractiveness of those right now is not particularly high. It would need to be something that would really thrive as part of our platform and how we do business. And we do it a little bit differently than everybody else. And we're not rolling up, you know, rolling up teams of people and doing it that way. We're not a wirehouse. So from that perspective, it's got to fit.
And so it's going to be very selective and it's going to be in the key markets that we have gaps in, I think. So probably more geographic, maybe some product stuff as it relates around alternatives. But at the end of the day, we feel we have all the pieces we need in place to grow organically. So it would have to be one of those things that just stands out as something that just, you know, screams, this should be a part of Northern, right?
Got it. I think with that, David, Mike, thank you so much.
Thank you.