SSGA’s AUM hits $3.9 trillion, a new record

State Street Global Advisors reported record high assets under management of $3.9 trillion as of June 30, an increase of 8.5% from three months earlier and up 27.6% from a year earlier, parent company State Street Corp.'s earnings release Friday showed.

The release attributed the growth in the year ended June 30 as "mainly reflecting higher period-end market levels and net inflows from ETFs and cash, partially offset by institutional net outflows."

SSGA had net inflows of $83 billion in the quarter ended June 30, much higher than the $39 billion of net inflows in the quarter ended March 31 and $23 billion of net inflows in the quarter ended June 30, 2020.

All but one of SSGA's four investment units were buoyed by positive net inflows in the second quarter led by long-term institutional strategies which attracted $55 billion — $37 billion of which was in fixed-income strategies, $13 billion in equities and $7 billion in multiasset-class portfolios. Alternative investments suffered net outflows of $2 billion in the quarter ended June 30.

By comparison, long-term institutional strategies in aggregate experienced net outflows of $8 billion in the first quarter and net outflows of $31 billion in second quarter of 2020.

ETF net inflows were down slightly to $21 billion in the latest quarter vs. $23 billion in the prior quarter and $26 billion in the year-earlier quarter.

SSGA's cash fund had net inflows of $7 billion in the three months ended June 30, compared with net inflows of $24 billion in the previous three months; and $28 billion in year-earlier period.

State Street said in the earnings release that investment performance of $224 billion in the second quarter was a significant boost to SSGA's total assets under management.

SSGA's total AUM in the second quarter was reduced by $1 billion from foreign-exchange losses. In comparison, the combined total of investment performance and foreign-exchange moves totaled $85 billion in the first quarter and was an aggregate $342 billion in the second quarter of 2020.

SSGA's investment management fees rose 2.2% in the second quarter to $504 million compared to the first quarter, and fees were up 18.6% from the same quarter a year earlier.

State Street said in its earnings report that assets under custody and/or administration also hit a record high of $42.6 trillion in the quarter, an increase of 5.8% compared with the previous quarter and up 27.1% compared with the year-earlier quarter.

State Street in the release attributed the growth in AUC/AUA in the year ended June 30 to market performance, net new business and client flows.

State Street's net income in the second quarter totaled $763 million, up 47% from the first quarter and up 10% from the second quarter of 2020.

In response to an analyst's question about State Street's plans for SSGA during the earnings call, Ronald P. O'Hanley, chairman and CEO said, "We think of the business as having three core elements to it — the ETF business, the institutional business and the cash business, and (they) are well-established franchises."

Mr. O'Hanley said State Street is focused now on the institutional business, which has "very strong client relationships around the world, but a limited product set. So what we've spent a lot of time thinking about is how do we take those relationships and that distribution channel and leverage in some way through enhancing our product capabilities."

He added that "we tend to dominate one end of the barbell. So as you look out across the rest of the barbell, almost anything would be eligible."

SSGA's current focus is on developing multiasset strategies, including customized approaches for "very large clients," Mr. O'Hanley said.

In response to another analyst's question, Mr. O'Hanley said the plan is to build new strategies organically within SSGA rather than through acquisitions of other money managers.

In terms of inorganic growth through an acquisition, Mr. O'Hanley said, "They're hard to engineer … so if something comes along that makes sense for our clients and for our shareholders we'll certainly look at it."