When Jay Hooley took over the helm of State Street in February last year, he set himself the task of doubling the firm’s non-US revenue within five years. “That’s an achievable goal,” he said prior to the official opening of his new Australian headquarters. “We currently have about 40 per cent of revenue from non-US sources and a little over 40 per cent of our staff are outside the US. So it implies compound growth in the mid-teens. That’s pretty heady, but I’m confident of getting there partly because of the markets we’re in.” In Australia, for instance, an increase in the superannuation guarantee would benefit the industry as a whole. And elsewhere in the Asia-Pacific region, asset pools are developing.
“We feel that post-crisis, as an organisation, we are very well positioned. We are also well positioned in a financial footing sense. We are one of the best capitalised financial institutions in the world.” In Australia, in particular, the stars seem to be in alignment for State Street for several reasons. Last month also marked the 10th anniversary of the exchangetraded fund (ETF) market in Australia, which State Street pioneered, and has taken off in the past couple of years as competitors have joined the scene. With structural change affecting the financial planning industry in Australia – mainly the move away from trail commissions to a fee-for-service remuneration model – the non-commissionpaying ETFs are suddenly even more attractive. Hooley says: “We view the increased competition as validating our strategy. ETFs represent one of the great innovations of our time. The competition is the result of an advanced market.
“One of the next evolutions will be in using ETFs to create targetbased funds.” In the institutional investment market, the prevailing trends also favour State Street, and not only because of the rising tide of superannuation contributions. Hooley points out that pension funds around the world are adapting their asset allocation strategies towards one which involves cheap beta, including a range of new betas such as fundamental and tilted index funds, and diversifying alpha, such as alternatives and hedge funds. This suits State Street Global Advisors, the firm’s asset management arm, to a tee. It is one of the largest index managers in the world and has in recent years had considerable success in developing alternative betas, such as low-volatility funds.