Scott Powers, president and chief executive of State Street Global Advisors, believes the financial crisis has created a unique opportunity for funds managers to provide more collaborative services, and relationships, to clients.
For example it recently created a range of options in a tender for a sovereign wealth fund, able to offer choices because of its wide product suite.
“We have three strategies in front of a large sovereign wealth fund for an emerging markets mandate: beta, enhanced beta and fully active. We also have emerging-market debt active and beta capabilities,” Powers (pictured) says.
Powers, while Boston-based, is a hands-on chief executive making more than 200 visits with clients last year, says there has been a definite trend recently to innovate, spurred by many factors with necessity often the most compelling.
“There has been a negative impact of the crisis, but out of that, we are seeing a lot of questions about how to manage volatility,” he says.
SSgA has been both a beneficiary and initiator of funds management innovation over the years – its sister, State Street Associates, is one example of the ideas generation behind that – with an almost constant beta management revolution its signature.
“We saw an acceleration of the investment trend of the separation between alpha and beta, through the crisis, and clients looked to us for beta management,” he says, adding about $1.7 trillion of the $2.1 trillion in assets under management is in beta solutions.
But beta management has evolved quite significantly from a simple low-cost solution, to an interest in alternative beta, and tilts to particular factors, especially in the wake of the crisis where there has been a general de-risking of assets by institutional investors.
The ETF market, which is forecast to grow from its current $1.5 trillion to $4.7 trillion in the next five years, is another example of the firm positioning for success. SSgA claims to have pioneered the market, launching the first US-listed ETF in 1993, but there is no denying its SPDR brand has penetration with more than 100 global offerings.
Powers believes the trend to defined contribution will also accelerate this year, citing that assets in defined contribution will eclipse defined benefit in 2012 globally.
“Strategically we have an initiative in SSgA to address that,” he says, which includes its passive offerings, understanding the value of transparency, as well as target-date funds.
“We also need to look at solving the problem of the fact we are all getting older, we don’t have enough money,” he says. “Longevity is a factor we all have to address.”
Among all of this, Powers says investors are definitely demanding closer and deeper relationships from their service providers, and in response to this State Street as a corporation is focused on delivering unique solutions to the unique needs of each investor.
Across State Street Corporation, which includes asset management, but also asset services and investment research and trading, 29,000 people in more than 26 countries are employed (its assets under custody are a persuasive $22.6 trillion).