State Street Global Advisors is losing the race for dominance in passive money management.
SSGA, Boston, remains in the triad of managers with more than $1 trillion in passive assets, but over the past five years has dropped from second place to a distant third behind BlackRock Inc. and Vanguard Group Inc., Pensions & Investments' data showed.
SSGA is ready to change, said Cyrus Taraporevala, SSGA's president and CEO in a telephone interview.
"We aren't happy about SSGA's results," Mr. Taraporevala said, stressing "there's work ahead of us."
Sources questioned whether SSGA can right its investment management business given missteps made by the unit's bank parent company, State Street Corp., which might deter investors.
For example, in the decade since the 2008 financial crisis, the bank's asset servicing and custodial business, State Street Bank and Trust Corp., was involved in lawsuits and subsequent settlements with institutional investors over post-crisis losses in securities-lending pools and frozen collateral pools as well as inflated foreign-exchange trading pricing in custodial accounts.
But sources attributed SSGA's failure to keep pace with its rivals as much to the intensely focused competitiveness of BlackRock, New York, and Vanguard, Malvern, Pa., to grow their passive businesses as to specific problems within the Boston-based investment management unit.
"For any index provider trying to increase their business, the competition from BlackRock and Vanguard is fierce. They are incredibly powerful asset-gathering machines with a laser focus on growth," said Timothy Barron, senior vice president and chief investment officer in the Chicago office of investment consultant Segal Marco Advisors.
For example, SSGA's worldwide passively managed AUM rose by $355 billion, or 21.1%, to $2.039 trillion in the five years ended June 30, analysis of P&I survey data showed.
By comparison, BlackRock managed a total of $4.153 trillion in passive assets worldwide, up 80.1% or $1.857 trillion in same period, taking the top spot on P&I's indexed fund manager list. Over the same period, worldwide passive assets managed by Vanguard grew even more — 146.5% or $2.292 trillion — to $3.855 trillion. Passive assets under management worldwide as of June 30 were provided by each firm in response to P&I's annual survey of index fund managers.