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State Street’s asset management arm is looking to buy a stake in a private credit or infrastructure manager, as one of the world’s largest passive fund managers tries to boost its presence in the fast-growing realm of alternative assets.
“We are shopping” for either a full acquisition or a minority stake combined with product partnerships, Yie-Hsin Hung, chief executive of State Street Global Advisors (SSGA), told the Financial Times.
The $4.7tn money manager wants to do a deal because it is behind rivals in offering nonlisted investments, including secondary funds that buy up stakes in existing private funds. Alternatives account for less than 5 per cent of SSGA’s assets under management.
“The area is so well established [and] given the size of our clients and their need to build and invest in a meaningful size, it I think just makes more sense for us to either partner or take a stake in a much more established firm where it’s one plus one equals three,” said Hung, who was hired about two years ago.
Although SSGA invented the first exchange traded fund with an S&P 500 tracker in 1993, it has largely missed out on recent enthusiasm for actively managed ETFs. It also stands at risk of falling behind in the race to benefit as investors shift significant portions of their portfolios into unlisted assets.
SSGA has hired a new head chief business officer, Anna Paglia, from Invesco, and has launched more than 80 products since she arrived earlier this year. Many more were in the development process, as SSGA sought to expand beyond the equity index tracking funds that had been its base, Hung said.
The asset manager recently joined forces with Apollo to seek regulatory permission to offer an ETF that invests in both public and private credit. It has also teamed up with Galaxy Asset Management to offer three actively managed digital asset and disruptive technology ETFs. SSGA received $100bn in net new money in the third quarter, although more than half went to its cash management products.
In the past four months, SSGA has taken minority stakes in Raiz, an Australian fintech platform, joined a consortium that bought US wealth management technology firm Envestnet and helped to launch a US version of PensionBee, a UK online pension manager in which it owns a stake.
While shopping for potential partners, State Street could face significant competition. Larger rival BlackRock bought Global Infrastructure Partners earlier this year and chief executive Larry Fink has made no secret of his plans to expand further into alternatives.
HPS, one of the largest freestanding private credit managers, is talking to BlackRock about a sale while considering an initial public offering or a minority stake sale, the FT has reported.
Hung declined to comment on HPS.