SSGA's AUM down slightly in quarter as flows reverse

State Street Global Advisors' assets under management fell a slight 0.9% to $3.86 trillion in the quarter ended Sept. 30 from its most recent peak assets in the prior quarter, according to parent company State Street Corp.'s third-quarter earnings release Monday.

Over the year ended Sept. 30, SSGA's AUM rose 22.7%, the release said, noting that the 12-month increase mainly reflected "higher market levels and net inflows from ETFs and cash, partially offset by institutional net outflows."

One of the reasons for SSGA's slightly lower AUM in the third quarter may lie in the sharp decline in net inflows of $13 billion into the unit's ETF suite in the third quarter after net inflows of $21 billion in the second quarter; $23 billion in the first quarter; and $20 billion in the fourth quarter of 2020, the State Street release showed.

SSGA's total net inflows into ETFs year-to-date Sept. 30 totaled $57 billion, higher than the total of $44 billion in net ETF inflows in all of 2020, but much less than the $201 billion year-to-date net ETF inflows BlackRock reported in its earnings release Oct. 13.

BlackRock's ETF strategies totaled $58 billion in the third quarter, which pushed the firm's ETF net inflows over the $185 billion figure for all of 2020.

Despite lower net inflows to SSGA's ETF funds, Ronald P. O'Hanley, State Street's president and CEO, told analysts during an earnings call Monday that SSGA's ETF assets recently crossed $1 trillion.

During the quarter ended Sept. 30, overall, including ETF net inflows, SSGA experienced total net outflows of $5 billion compared with net inflows of $83 billion in the prior quarter and net outflows of $65 billion in the quarter ended Sept. 30, 2020.

SSGA's long-term institutional strategies had net outflows of $6 billion in the quarter compared with $55 billion of net inflows in the prior quarter and net outflows of $8 billion in the same quarter a year earlier. SSGA's cash fund had net outflows of $12 billion in the quarter vs. $7 billion of net inflows in the quarter ended June 30 and net outflows of $58 billion in the third quarter 2020.

A bright spot for State Street in the three months ended Sept. 30 was another new record high of $43.34 trillion in combined assets under custody and/or administration, up 1.7% from the previous quarter and up 18.3% from the year-earlier quarter.

Growth in State Street's AUC/AUA in the three months ended Sept. 30 was driven by higher market levels, client inflows and net new business growth.

State Street also had a good quarter regarding investment management revenue, which was up 4.4% to $526 million — a new record — in the quarter ended Sept. 30 and up 15.6% from the year-earlier quarter.

State Street said investment fee growth in the year was driven by higher average equity market levels and net inflows into ETFs, "partially offset by a previously reported idiosyncratic institutional client asset reallocation and money market fee waivers."

Brendan Paul, a State Street spokesman, did not immediately respond to a request for the name of the client.

State Street's net income was $714 million in the third quarter, down 6.4% over the three months and up 29.6% from the third quarter 2020.

In response to an analyst's question during the earnings call, Mr. O'Hanley said State Street intends to continue to focus on building out its asset servicing unit as well as "for our own business, SSGA," noting that the bank intends to continue to invest in enhancing the investment unit's existing capabilities.