State Street 3Q ETF Outflows Soar to $14B

Falling stocks, bonds crimp fund purchases; fee revenue dropped 8%.

State Street Corp.’s exchange-traded fund division was hammered by soaring third-quarter outflows as volatility in fixed income and equity markets curbed investor enthusiasm.

The third-largest U.S. ETF issuer reported $14 billion in net outflows in ETFs, a reversal from the $13 billion pulled in during the same period last year. Earnings per share fell to $1.80 for the Boston-based firm from $1.96 a year earlier. Still, the figure beat FactSet’s aggregated analyst expectations of $1.78. Shares of the company fell nearly 2% to $62.60 during midday trading.

Big ETF issuers have reported a mixed bag of results this quarter. Charles Schwab Corp. this week reported revenue from ETF sales fell 10%, and also announced declining assets under management and fee revenues. BlackRock Inc., the largest ETF issuer, said its iShares unit helped lift earnings per share, while at the same time inflows dropped by more than half to $22 billion from the year-earlier quarter.

Equity-focused ETFs at State Street, which manages 141 U.S.-traded ETFs, performed the worst in the quarter among that issuer’s asset classes, with $9 billion in outflows. Alternative investments reported $7 billion in losses, while fixed income funds brought in $2 billion.

The lackluster performance was “largely due to lower equity and fixed income market levels,” Chief Executive Officer Ronald O’Hanley said on an earnings call with analysts Tuesday.

The S&P 500 has fallen 22.8% year to date. Meanwhile, the yield on the benchmark 10-year note has topped 4% for the first time since 2008 following hard-to-tame inflation and consequent moves from the Federal Reserve. Yields rise as bond prices fall.

Among the U.S.-based funds with the greatest outflows in the third quarter are the SPDR Gold Trust (GLD), the SPDR S&P 500 ETF Trust (SPY) and the SPDR Blackstone Senior Loan ETF (SRLN), which collectively lost $9.7 billion in assets, according to ETF.com data. Significant outflows were also seen from a low-yielding Asia-Pacific fund, according to an earnings statement.

Meanwhile, management and fee revenues also fell. State Street announced an 8% decline in fee revenue, with segments like servicing and management fees decreasing 12% and 10%, respectively.

Contact Shubham Saharan at [email protected]