Gus Fleites, the chief architect of State Street Global Advisors' (SSgA) exchange-traded funds (ETF) business, has been sacked.
SSgA's press office today confirmed rumors spreading throughout the indexing industry that Fleites had left the company, although it declined comment on the circumstances surrounding his depature.
Greg Ehret and James Ross, two SSgA veterans with decades of service at the firm, will take over for Fleites in his various roles. In addition to heading up the streetTracks ETF effort, Fleites was president of SSgA Funds Group and managing director of the Advisors Strategy unit.
Speculation about the cause of Fleites' departure is rife, and the rumors are settling on two themes. Some insiders are pointing at this interview with John Spence of Marketwatch, which appeared on May 9. In the interview, Fleites spoke aggressively of the role that ETFs can play in pension plans - at the expense of traditional active funds - and promised a major marketing and advertising push for SSgA's ETFs, as part of a broader bid to win back market share from Barclay's Global Investors (BGI). There's some speculation that this interview rubbed SSgA execs the wrong way.
A more fundamental reason for the depature, however, may have to do with SSgA's need to win back market share from BGI. Despite the recent success of some its newer funds, particularly its blockbuster gold ETF, SSgA's share of the ETF market has been declining at the expense of the BGI's iShares unit for years. That decline accelerated in the first quarter of 2005, when BGI vacuumed up $12 of the $13 billion flowing into U.S. ETFs, while SSgA actually posted net outflows for the quarter. (Data: Morgan Stanley)
In the Marketwatch interview, Fleites said that BGI had been very successful with an aggressive advertising campaign, but that "it would be a big mistake to count us out now."
The appointment of two insiders throws some cold water on the idea that SSgA wanted move in a different direction with its ETF franchise. If SSgA truly wanted to change tracks, chances are it would have brought in an outsider with fresh ideas.