Schwab, State Street Report Mixed 1Q at ETF Units

Tumultuous markets drove investors from stocks and into money markets.

RonDay
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Managing Editor
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Reviewed by: Ron Day
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Edited by: Ron Day

State Street Corp. and Charles Schwab Corp., two of the world’s biggest exchange-traded fund issuers, reported a mix of slowing flows and revenue in their ETF units as roiling markets pushed investors away from stock funds and into safe havens like money markets. 

State Street, the No. 3 ETF issuer, reported that $12 billion flowed out of equity ETFs in the first quarter. That total was partially offset by $5 billion in incoming cash to bond ETFs at the company, which owns the oldest and largest ETF, the $373.6 billion SPDR S&P 500 ETF Trust (SPY). 

Schwab, the No. 5 ETF issuer, said revenue in its unit that houses ETFs fell 6% as average client assets and fees slipped. Fees and average client assets in the business that holds so-called third-party ETFs and mutual funds also dropped.  

ETF businesses were hit with a March downturn as fears of a weakening global banking system spread, fueled by the collapse of a pair of regional U.S. banks and Switzerland’s Credit Suisse buyout by rival UBS. Stubbornly high inflation, rising interest rates and lingering fears of a recession also pushed investors from equity funds, which typically charge higher fees, and into low-cost money markets. 

“Fears of contagion from bank failures earlier in the month likely sent depositors fleeing to store their money in alternative cash-like vehicles,” Morningstar analysts Adam Sabban and Ryan Jackson wrote in a note Monday. A strong January is the main reason ETFs had positive net inflows, they wrote. At the same time, money market funds took in $363 billion in March “amid turmoil in the banking sector,” they wrote. 

Boston-based State Street had a total of $6 billion in outflows for the quarter, reversing the $27 billion that arrived in the fourth quarter and the $17 billion in inflows from the year-ago quarter. The company’s shares fell 10% in midday trading. 

Schwab, based in Westlake, Texas, didn’t report its ETF flows. It did say total ETF assets rose 5% from the year-ago quarter to $280.6 billion, which was an 8% increase from the preceding period. Its shares gained 2.4% in afternoon trading. 

BlackRock Inc., whose iShares unit is the world’s largest exchange-traded fund issuer, said last week that inflows into iShares fell 61% to $22 billion during the first quarter as volatility sent investors into low-risk products.  

 

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Ron Day is Managing Editor at etf.com. He joined the company in October 2022 and previously served as editor and deputy managing editor.

Ron covered business and financial news at Bloomberg News for 20 years, working on the breaking news, technology, commodities, headlines and First Word teams. He was previously senior editor at ESG news outlet Karma Impact and filled the same role at Boundless Impact. He also covered a variety of beats at New Jersey daily papers including the Daily Record in Parsippany, the North Jersey Herald & News and the Asbury Park Press. Ron's freelance work has been published in AARP.com, Investopedia.com and BigThink.com.

Ron is an advocate and fan of literacy. He hopes to one day master his Telecaster, rather than the other way around. His wonderful family includes a 10-lb. malti-poo named Emmy.