State Street's plan for power, product, partnerships

State Street Global Advisors (SSGA) is the largest asset management firm in Australia by locally sourced assets under management (AUM) - by some margin - though few realise.

With nearly $500 billion in local assets under its watch, mostly via institutional mandates, State Street - whether directly or, more often, indirectly through superannuation funds - touches the wealth of many Australians.

Speaking to Financial Standard, SSGA head of Asia Pacific Kevin Anderson mapped out the firm's game plan for Australia - its ETF positioning in a fiercely contested market, product development aspirations, and partnership strategy.

SSGA has 17 ETFs listed in Australia. Their genesis, Anderson said, originates from what it sees as core building blocks that afford Australian investors local and global exposure through a series of equities and fixed income products. Those building blocks, he added, are informed by how investors at larger scales are building their asset allocation.

"We're a firm with a scaled footprint in terms of offering, in particular, index investments. Index isn't the only thing that State Street Global Advisors does, but certainly, we have a significant amount of our assets under management in index or index-like investments...," he said.

Anderson makes no bones about the fact that SSGA's ETFs aren't thematic products -which generally aren't actively managed and follow an index, tracking small subsets of larger industry classifications - even if competitors like Betashares look to own that space.

SSGA's commitment to stick to its guns - its institutional heritage, which Anderson said is "a theme that informs how we think about ETFs as products" - is evidently unshakeable, though whether that approach has solidified its position or held it back is debatable.

Despite ranking as Australia's sixth-largest exchange-traded product (ETP) manager by funds under management (FUM) - $9.7 billion, up 11% over the year to December 2024 - State Street is lagging other major players. Vanguard, the powerhouse in this market, increased its FUM by 33% over the period, while Betashares and BlackRock gained 40%, according to Rainmaker Information.

The latter two issuers have aggressively expanded their product suites over the two years to December 2024, launching 34 and 15 new ETPs, respectively - and not just thematic funds.

SSGA, by contrast, launched no new ETPs over the period.

However, the link between product expansion and market dominance isn't absolute.

Vanguard's standing was steady despite delisting one product and launching none.

Regardless, State Street's market share has steadily faded. A decade ago, it controlled 25.7% of the market's FUM. By December 2024, its share had fallen to 3.9%.

Anderson said it was "important for us to create some more competition around fees," leading SSGA to slash the management costs of six of its ETFs last June - by 30% to 60%. Three of those ETFs were poised to be the lowest-cost funds in their respective categories, a move that, he said, was met with a "positive acknowledgment from advisers."

Rainmaker Information head of research John Dyall previously said the fee reductions were a "significant break" in behaviour, albeit "periodic but modest fee reductions in the past," adding that "State Street is back in the business of providing ETFs to Australian investors."

But fees alone, Anderson said, don't typically create sustained, long-term outcomes of success.

"What ultimately needs to be part of the equation is a compelling, straightforward set of products, an ability to deal effectively with the adviser community, to be able to anticipate their needs in a world where they also have demands, and to provide insights into how our products are used. Those elements of education and partnership, along with a competitively priced series of ETF products, create potential for market share," he said.

Dyall predicted that it'll launch "a bunch of new products" that draw on its intellectual capital and the success of its products in the US - where it's the third largest ETF provider.

"It can't afford to let the Australian market be its one failure point," he said.

Product development

SSGA gleans insights from large asset owners, such as super funds in the Australian market - whose end clients represent the broader population - as well as advisers, who provide valuable perspectives on different constituencies. The asset manager also leverages its long-standing relationships with investment platforms and research houses.

"All of those stakeholders have a view that helps inform our product development process," Anderson said.

"Our approach is to have the local eyes and ears, because otherwise you're creating a cookie cutter type product for investors all around the world who have different needs."

Drawing on these insights, SSGA is exploring how Australian fixed income investors use treasuries, deposits, corporate bonds, and bank CDs (certificates of deposit), that are "ultimately, a very popular investment for investors in Australia," he said.

There may be, however, other ways that investors can seek higher fixed income yields, perhaps taking different types of risk within those investments to gain greater yield.

"We've been looking at how we can create some opportunities in floating-rate products that allow for a greater diversification away from the dominance of CDs," he said.

He explained that "fixed income is incredibly important to us in terms of business growth," with SSGA's AUM for fixed income and cash rising 50% in Australia since December 2023.

"In part, of course, that's cyclical, because in the years preceding 2022 from 2009 onwards, we were in a very low yield environment. Once there became a yield curve again to speak about in most parts of the world - Australia, the US, and other markets that were in that very awkward negative yielding territory - fixed income gained more interest with investors," he said.

Though not unique to Australia, considerations like retirement profiles and the treatment of income or capital gains are also elements that inform how SSGA thinks about product.

Outside of Australia, SSGA partnered with Apollo Global Management last year to democratise public-private investments in the US.

While public-private partnerships are not currently active locally, Anderson welcomed ASIC's discussion paper on private markets, which he said explores "the right balance" of complexity, liquidity, and transparency for retail and smaller wholesale investors.

"That's a dynamic environment that we're watching very closely. It's an area where there can be a combined mutual win of investment depth and specialism from firms with longevity in delivering outcomes with a distribution capability like SSGA," he said.

While not new in the strictest sense, SSGA also launched an unlisted gold fund last year in partnership with the World Gold Council, which has grown to $90.1 million in size.

"Gold has been a popular investment, not just in Australia, but in other parts of the world as well. We've seen interest in this metal for investment reasons that are well understood, given the volatile environment in which we're living," he said.

Partnerships

SSGA picked up a stake in micro-investing platform Raiz Invest last August, a move Anderson described as a demonstration of its commitment to working more with and understanding the rapidly evolving environment of the intermediary sector.

He said while neither organisation is the beneficial owner of assets - held by Raiz clients - both share a common goal: to support the platform's customers in growing their wealth.

"It's [the strategic relationship] a shared commitment to help individual investors manage their investments and savings, ultimately for their retirement," he said.

Benefits to individual investors aside, it's a "win-win," he said, as Raiz secures a pipeline to SSGA's insights, education, and tools, while SSGA gains a deeper understanding of a more "cutting-edge element" within the fast-developing intermediary market.

He said the firm will "continue to look for other areas, potentially in Australia," where it can unlock resources for partners that they "mightn't be able to access as easily as we can" - and vice versa.

"We want to join forces with wealth firms of a similar mind, who really have a strong sense of fiduciary mindset to help clients grow, help them save, and help educate," he said.

Having been a fixture in Australia for some 35 years, SSGA has been afforded the benefit of father time to cement rock-solid ties - not just with wealth firms like Raiz, but with institutional asset owners that anchor its crown as Australia's top asset manager.

He said that position has come by doing one thing above all: putting the client at the centre of everything SSGA does. That doesn't mean fulfilling every client demand, but "understanding what they're trying to do," then "trying to help them execute their strategy."

"What I want to ensure we do in Asia Pacific is continue to have true partnerships with key institutional asset owners where they believe that they can achieve more working with State Street Global Advisors than, for example the returns on their MSCI World Mandate," he said.

To illustrate, he highlighted how SSGA's chief operating officer recently visited Sydney to meet with chief executives of other firms - not named - discussing not the nature of their mandates but sharing experiences on how financial services firms move forward with technology, data, and operational strategies heading into 2026 and beyond.

"Some of our asset owners are like small asset management firms, so having that ability to interact is something I want to maintain. I believe that's a feature that should differentiate leading asset managers from simple product providers in the asset owner space," he said.

In saying that, with regards to the manufacturing element of what an asset manager does, the primary goal, he said, is to deliver the investment objectives clients are looking for, whether that's a return as close as possible to the index or a risk-adjusted return.

While that's a bedrock, full-service asset managers must be "wider than this" to succeed, he said.