State Street Loses $1B in ETF Assets in 3Q

State Street Corp., the asset-management behemoth with $1 trillion across 138 ETFs, said its ETF business lost $1 billion in outflows in the third quarter as investors pulled money from stock and alternative funds, even as the firm’s earnings topped expectations.  

The third-largest exchange-traded fund provider said investors drained equity ETFs by $5 billion from stock and alternative funds, while adding $4 billion added to fixed income.  

The Boston-based firm, which manages the world’s biggest ETF, the $402.8 billion SPDR S&P 500 ETF Trust (SPY), saw stock fund outflows as the Federal Reserve kept interest rates elevated to combat persistent high inflation. While many investors are searching for high yields, even as many bond funds have not performed well, others have chosen to wait on the sidelines of the equity market, hoping for a less tumultuous stock environment.  

State Street’s revenue dropped about 9% to $2.69 billion during the quarter, missing the Bloomberg analysts’ estimate of $2.98 billion. Its earnings per share of $1.93 beat Bloomberg analysts’ expectations of $1.82. State Street’s stock rose about 2% to $69 in afternoon trading.  

Outflows Amid Market Turbulence 

Other asset managers have also seen inflows into ETFs fall from the previous quarter. BlackRock posted net inflows of $29 billion, down from $48 billion the previous quarter. Fidelity made a surprise comeback, beating other fund families for the most inflows in the third quarter into all of its funds, according to Morningstar data. Overall, U.S. ETFs saw inflows of $112 billion in the third quarter, bringing in $40.1 billion in September alone, according to Morningstar.  

The third-quarter outflows were a big reversal from the previous quarter when State Street's ETFs brough in $27 billion overall. In last year’s third quarter, the ETF unit had $14 billion in outflows.  

Contact Lucy Brewster at [email protected].