State Street attracts $78bn net new assets in Q3
State Street has announced that its asset management subsidiary State Street Global Advisors (SSgA) has attracted $78bn of net new assets in Q3 this year.
In its Q3 report, State Street said its assets under management had grown 8.2% in the quarter, from $1.9trn to $2.01trn. This represents an increase of 11.3% on Q3 last year. Investment management revenue grew 2.0% on last quarter ($251m) and 9.6% on last year, thanks to “stronger equity markets and net new business”.
State Street also said it has been awarded $211bn in asset servicing mandates in the quarter. Overall, State Street has $23.4trn in assets under custody and administration, an increase of 4.5% on last quarter and 9% on Q3 last year.
Joseph L. Hooley (pictured), State Street’s chairman, president and chief executive, said: “Our third-quarter results reflect continued resilience across both asset servicing and asset management, partially offset by weakness in trading services. In a difficult environment, we were able to achieve positive operating leverage by controlling expenses and by continuing to implement our Business Operations and Information Technology Transformation program.”
Hooley continued, “Although equity markets have improved, clients remain conservative in their investment allocations which adversely affects our revenue. We continue to see demand for our solutions as evidenced by $211 billion of new asset servicing wins, net new assets of $78bn to be managed by State Street Global Advisors and a strong pipeline.”
As well as the difficult trading environment, State Street saw the failure of merger talks between SSgA and UBS Global Asset Management, which fell through in June. UBS’ asset management business is known for its active asset management style, while SSgA has built its profile mainly in passive or indexed products. UBS had $599bn in assets under management as of June 30 and State Street had $1.9trn.
In September, SSgA lost nine senior asset management executives. Liability manager Ben Clissold left to join BlackRock; Moira Gorman, former head of local authority relations, moved to Threadneedle; Vin Battacharjee, European head of intermediary business, entered the private equity sector. The other six were: Kieran Moody, managing director of UK pooled funds; Nick Pearce, head of finance; Richard Owen, head of UK business development; Scott MacMillan, head of relationship management; and senior relationship managers Andrew Hitchen and Julie Caffrey.
State Street is primarily a custody bank and gains the bulk of its pre-tax profits from servicing, rather than managing, funds. In July, State Street announced the acquisition of Goldman Sachs Administration Services. The acquisition was completed on 15 October, consolidating its position as a leading hedge fund administration services provider.
In September, State Street launched an investment servicing solution for specialist fund managers, comprising transaction management, record-keeping, corporate action processing, data management, reconciliation, pricing and information delivery.
But SSgA has restated its commitment to the asset management sector and said it would expand its liability-driven business.
Through its SPDR platform, SSgA manages $310bn in more than 160 ETFs worldwide. Over the past 12 months, State Street has brought 28 new ETFs to Europe. In May, SSgA listed four new physically backed UK fixed-income ETFs on the London Stock Exchange. The new SPDR ETFs, which are also listed in Germany are: SPDR Barclays Capital Sterling Corporate Bond ETF, SPDR Barclays Capital UK Gilt ETF, SPDR Barclays Capital 1-5 Year Gilt ETF and SPDR Barclays Capital 15+ Year Gilt ETF.
In September, SSgA launched the passive SSgA S&P MLP Index Strategy, which offers exposure to master limited partnerships (MLPs) and other related securities of companies, mainly in the energy infrastructure sector. It is managed using a replication methodology to proportionally invest in the securities comprising the S&P MLP Index, and is currently implemented as separately managed accounts.
The total annualized returns and distribution rate of the S&P MLP Index as of June 30, 2012 are 7.72% (1-year), 26.88% (3-year) and 9.62%(5-year) with a distribution rate of 5.99%.
Lynn Blake, senior managing director of SSgA and CIO of Global Equity Beta Solutions, said: “The current growth in the energy infrastructure industry offers opportunities to investors seeking to diversify their portfolio while generating stable revenue streams. Clients have access to an alternative asset class with high historical returns and distribution rates.”