Ronald P. O'Hanley faces big challenges now that he is CEO of State Street Global Advisors.
Mr. O'Hanley on April 1 replaced Scott Powers, marking his return to money management after quitting as president of asset management and corporate services at Fidelity Investments about a year ago. Mr. Powers will remain at the Boston-based company through August to help with the transition. He had been CEO for seven years.
Among the hurdles Mr. O'Hanley faces are keeping the passive business strong amid increasingly stiffer competition, especially in exchange-traded funds; figuring out what to do with SSgA's significantly smaller active business; and making sure he receives the resources needed from parent State Street Corp.
“The investment marketplace is incredibly competitive. There are low barriers to entry and some very formidable competitors in the ETF space,” Mr. O'Hanley said in a telephone interview on April 2.
Earlier this year, Vanguard Group Inc., Malvern, Pa., overtook SSgA as the second-largest exchange-traded fund provider. Data from analytic website ETF.com show that, as of the close of business Jan. 20, Vanguard had $432.65 billion in ETF assets, while SSgA had $431.8 billion.
A report from BlackRock Inc. showed Vanguard had $454.9 billion in ETF assets as of Feb. 28, while SSgA had $441 billion.
One investment banker to money managers, who asked not to be named, said “SSgA needs a more drastic shift to avoid the slow slide in relative position.”
The banker added that losing the No.2 spot to Vanguard “is a blemish, though Vanguard is a tough competitor. They (SSgA) aren't likely to get it back. Smaller, more nimble competitors like WisdomTree and First Trust have been much more innovative and growing faster. They aren't going to catch up to SSgA any time soon, but SSgA could use an infusion of innovation.”
He said he doesn't believe SSgA will get that infusion from Mr. OHanley alone, because Mr. O'Hanley doesn't know the ins and outs of the ETF business. He is, however, someone who understands the asset management business, can formulate a strategy and bring in new talent as needed, the investment banker said.
Andrew McCollum, managing director at Greenwich Associates, Stamford, Conn., noted one way Mr. O'Hanley can grow SSgA's passive business is to focus on fixed-income ETFs. Fixed-income ETFs accounted for 8.4% of SSgA's $466 billion ETF business as of Dec. 31.
“The big opportunity in their ETF business is going to be on the fixed-income side,” said Mr. McCollum. “Investors are looking to ETFs for greater liquidity in their fixed-income portfolios, so that'll certainly be something Ron will want to look at.”