The US group said the acquisition would enable it to expand its presence in Luxembourg and gain local fund administration capabilities in Switzerland, bringing its total funds under administration to CHF420bn (€394.4bn, £337bn, $413bn).
The deal will make Northern Trust a top 10 asset servicing provider in Luxembourg by assets under administration.
The Chicago-headquartered firm will integrate the Swiss fund administration unit into its Global Fund Services business.
UBS Fund Management (Switzerland), based in Basel, is the Swiss market leader in management company and white-labelling services.
The transaction is expected to close in the second half of 2017, subject to regulatory and fund board approvals.
After the deal, administration of UBS Asset Management’s traditional funds, currently serviced by UBS Fund Management (Switzerland) or UBS Fund Services (Luxembourg), will pass to Northern Trust.
UBS clients will continue to be supported by their current relationship management teams following the transaction and UBS Asset Management will continue to offer management company, white labelling and representative services to its clients.
Northern Trust chairman and chief executive, Frederick Waddell said: “This agreement represents a significant opportunity for Northern Trust and our clients as we broaden our scale, products and market reach across Europe.
We look forward to expanding our service offering in Switzerland and further deepening our presence in Luxembourg.”
Northern Trust had assets under custody of $6.7trn, and assets under management of $942bn at the end of 2016.
Ulrich Koerner, president UBS Asset Management, said the move would enable the Swiss group to focus its efforts on “helping clients address their global investment challenges”.
He added: “[Our clients] will benefit from the combined resources and capabilities of UBS Asset Management and Northern Trust, along with our mutual commitment to innovation and an industry-leading platform.”