State Street Global Advisors (SSgA), the asset management business of State Street Corporation, is strengthening its capabilities in both active and passive strategies.
The company says investors today face increasingly complex investment challenges. Confronted with historically low rates, market uncertainty and the challenge of finding returns amid a complex regulatory environment, investors are demanding new investment approaches and strategies from asset managers.
“The markets of today are fundamentally different than those of the past due to the financial crisis and unprecedented monetary intervention, which has impacted investment returns and interest rates,” says Scott Powers (pictured), president and chief executive of SSgA. “In this dynamic market environment, we are evaluating our current strategies, building on our core business strengths and expanding into areas that will enable us to effectively deliver tailored solutions. The end result is an integrated investment approach focused on helping clients to achieve their objectives.”
“SSgA is committed to being a leader in core indexing, advanced beta and ETFs and we believe strongly in the value of passive exposure,” says Rick Lacaille, executive vice president and chief investment officer at SSgA. “While we see tremendous potential to build upon our beta franchise, we also believe in the importance of active management and the essential role that active and alternative strategies can play in enhancing portfolio returns through alpha generation.”
According to research conducted by State Street, 45 per cent of asset owners reported that low returns on traditional assets have increased their organisation’s appetite for alternative investment strategies to meet funding demands. Year-end 2012 AUM for global alternatives reached record levels of USD6.6trn, having grown over the last six years at a rate of over seven times that of traditional asset classes.
Further aligning its leadership with the client challenges that exist today, SSgA is combining core teams in active quantitative developed and enhanced equity. It is expanding the depth of its fixed income strategies to extend further on the credit spectrum targeting areas such as structured credit, high yield and emerging market debt. Managed fixed income and cash assets worldwide account for USD19trn or 37 per cent of total managed assets, benefiting from trends following the financial crisis.
“We believe that the boundaries between fixed income disciplines are blurring and that a broad view is beneficial,” says Lacaille. “For instance, it is clear that cash management is moving away from a traditional money market framework and that optimal portfolio management now incorporates skills typically associated with managing longer dated fixed income securities. In addition, we believe that active quantitative and enhanced equity strategies operate best as a single discipline and combining them will allow us to serve clients with deeper perspective and resources.”
As part of this approach, SSgA is combining its cash and fixed income capabilities under the leadership of Steve Meier, chief investment officer head of cash, who will become CIO of fixed income, currency and cash. Active quantitative developed and enhanced equity will also be combined under Ted Gekas, currently head of global enhanced equity, who will take a new role as CIO and global head of active quantitative equity. As part of these changes, Ali Lowe, CIO global equities, will leave the firm at the end of 2013 after a transition period. Kevin Anderson, currently CIO and head of fixed income, will assume the role of head of investments for the Asia Pacific region based in Hong Kong. He replaces Lochiel Crafter who was recently appointed as head of the Asia Pacific region, succeeding Bernard Reilly, who has taken the role of global head of strategy for SSgA.
“These promotions reflect strong individual and team performance across strategies and these individuals have spent 15 years on average at SSgA,” says Lacaille. “Looking ahead, we remain committed to building upon our talent. Additionally, in 2012, 70 per cent of our active quantitative investment strategies beat their benchmarks and our cash business has seen continued inflows during a time when many of our peers have been losing assets.”
To maximise the effectiveness of its quantitative research, SSgA is integrating its Advanced Research Center (ARC) and dedicated IT support into their respective investment teams.
