Sunniva Kolostyak: Welcome to Morningstar, where I am today joined by Ann Prendergast, the executive vice president and head of EMEA at State Street Global Advisors. Ann, thank you very much for joining today.
Ann Prendergast: Thank you for having me.
Kolostyak: I want to start by talking about the success that State Street has had within the ETF space. I mean, you’ve captured $26 billion worth of inflows in the past year. So, I guess, what is it that’s giving you that competitive edge?
Prendergast: Yeah, I think our competitive edge is our process. So we spent a lot of time talking to our clients, our investors and our partners. And then we seek to reflect their views in either our range or our innovation pipeline. Now when we think about 2024, we saw a very strong rally in US equity markets, and we were well prepared in advance of that through having highly efficient, cost-effective products within our range, across both US and developed equities, from large-cap to mid-cap to small-cap.
The other thing that we did was we continued to reduce the fees within our range. And that’s a balance of both client demand, scale, and driving further efficiencies. So this is not about undercutting our competitors, not about a race to the bottom. It really is about ensuring that we deliver value for our clients.
And the other thing that we did last year was we launched a quality aristocrats ETF for US QUS5 and developed markets QDEV. And this is very complimentary to our range. And actually, it’s for those investors who are seeking the opportunity to have a higher adjusted risk/return versus traditional indexes. And it’s particularly relevant in the current environment where we see volatility being driven by geopolitical and economic uncertainty.
Kolostyak: So, with all of this in focus for growth, how does this help the retail investor in particular?
Prendergast: So there’s a few places that we deal directly with retailers. We work with retailers through our intermediaries. So we see increased demand from retail intermediaries and platforms, as it relates to ETFs particularly, for savings and investment plans. And the other place that we work with intermediaries is for their own business. We deliver products that have good products, good marketing, good pricing, good technology, which helps them deliver their business and grow their business with the retail space.
It is worth saying, as it relates to ETF, we’re seeing increasing demand, too, from the institutional clients. And I think that’s a trend that we’re going to continue to see as they see the benefits of using them within their portfolios.
Kolostyak: Well, speaking of trends, active ETFs. What are your plans in this space?
Prendergast: Yeah. So what’s interesting is that Europe is now catching up with where the US have started to go since about 2019. And indeed we can see that in 2024. So if we look at the assets under management in active ETFs, it’s gone from $7 billion to $20 billion, products have gone from 103 to 178, and the providers have gone from 28 to 35. So there’s certainly a trend there that we expect to see.
Now, as State Street Global Advisors, we have been launching and growing active ETFs for a number of years, both through our own in-house active capabilities but also through partnerships. And we’ve done that, we have about over $15 billion in active ETFs globally. And that’s in active equity, fixed income assets and digital ETFs.
And what we expect this year is that we will launch active UCITS ETFs. And again it will be in the area of equity, fixed income, and alternative capabilities, through both our systematic or fundamental capabilities, which are in-house, and through our partnerships as well.
Kolostyak: Very interesting. So it’s also worth mentioning that you have been recognized by Morningstar as a distinguished leader in the ETF space. So I wonder, for people looking to enter the asset management industry, what would your advice be to them?
Prendergast: Well, I’ve been in this industry 30 years, and so that might tell somebody something that it’s been of interest. It’s kept me interested in that time to keep me there. But I do think that what’s driven the interest for me is that it’s always changing. There’s always new things coming through. And also, you’re at the mercy of markets, which can change very, very quickly, both on the upside, and the downside, and even within the 1-12 months. So there’s always change within our industry.
And the second thing for me is that we are working with investors to deliver real world outcomes. And so for that it makes it a very real and very rewarding career as far as I’m concerned.
Kolostyak: Well, Ann, thank you very much for joining today. For Morningstar, I’m Sunniva Kolostyak.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
