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As we all continue to respond to the COVID-19 pandemic, I want to share with you a detailed update on State Street Global Advisors – including how we have managed some of the highest volumes in history for our clients during this crisis, how our investment teams have adapted and our plans for a gradual return to our offices once it is safe to do so. I apologize in advance for the length of this letter; I have had many client requests for more detail rather than a high-level summary. That said, this note intentionally avoids prognosticating on the direction of markets.
The health and safety of our employees remain paramount. As I shared in my prior message, our business continuity plans and experience with team members based in mainland China have served us well. We are currently operating with more than 90% of our employees working from home globally. We have implemented additional measures to ensure a greater sense of security and peace of mind for employees and their families, most notably with our decision to suspend headcount reductions, likely through the end of the year, and to expand paid leave for employees in need.
These actions have enabled us to keep our team’s focus on serving our clients in the face of record trading volumes. In the first quarter alone, we managed more than a million trades valued at approximately $750 billion.1 In the month of March, our year-over-year fixed income trades were up over 198% and equity trades were up 74%.2 April was another high-volume month. Despite these very high volumes as well as extreme market volatility, there has been no disruption of service to our clients, thanks to the dedication of our employees.
We are also committed to increasing the volume and frequency of market perspectives we share with you, given fast-moving events. We have launched a market volatility thought leadership web hub, in addition to sharing insights directly with clients on a daily basis.
Each of our investment teams has also responded to the extraordinary market environment:
Investors have increasingly turned to ETFs for tactical allocation moves and liquidity, leading to heavy trading volumes. In the US, trading volumes hit record highs for both equity and fixed income ETFs. While average daily equity US ETF trading volume is normally about $60 billion, in the five weeks through the end of March that more than tripled to over $200 billion per day. Fixed income ETF daily trading volumes also tripled to an average of $35 billion.3
Amid all this activity, our SPDR ETFs are leading the way, providing an essential source of liquidity and price discovery in the face of unprecedented volatility and uncertainty. All told, SPDR ETFs represented 42% of US ETF trading from late February through the end of March4, since many of our ETFs are among the most liquid in the world.5 In fact, SPY – the first ETF created in the US – saw 15 consecutive days of secondary-market trading of more than $50 billion, one day hitting a record high of $113 billion.6 In March, we saw significant ETF inflows as investors flocked to many of our liquidity-leading ETFs providing exposure to broad-based indices, sectors, and commodities. April was also a significant month of ETF inflows for us.
We continue to engage with a variety of key stakeholders. Our experts are being called upon by regulators and central banks throughout the world to provide real-time insights into market structures and liquidity.
Engagement with our portfolio companies also continues to be a priority. In March, we issued guidance to clarify that while environmental, social and governance (ESG) issues remain key value drivers for us as long-term shareholders, our stewardship team would be focusing on more immediate ESG challenges arising from the crisis such as employee safety, customer and supply chain issues, and financial resiliency.
Finally, we have been supporting our communities with donations from the State Street Foundation to match relief funds helping fight the pandemic while also doubling our employer match contributions to qualifying charitable organizations. In addition, we are organizing virtual volunteering opportunities in local communities affected by the virus.
The strength and stability that have been a cornerstone for State Street for over 227 years are particularly critical today. State Street recently released first quarter results showing solid year-over-year performance, demonstrating the diversity and durability of our business model. For State Street Global Advisors in particular, although we saw a reduction in overall assets under management due to lower market levels, we had net positive flows of $39 billion during the quarter.7 Since the onset of the crisis, State Street has worked closely with the Federal Reserve across three important programs – either as an intermediary or through our appointment as custodian and administrator – designed to bring liquidity and support to critical markets.
We have also taken additional measures to strengthen the resiliency of our technology and infrastructure, with special precautions designed to ward off heightened cyberthreats and ensure the safety of client data.
We are fortunate that our business can be conducted in a way that allows for the vast majority of our employees to work from home. In addition, we have learned from our experience in mainland China, where we went from nearly 3,000 State Street employees in Hangzhou working from home in mid-January to having approximately 75% return to the office by mid-April.
How and when we return to our offices in other parts of the world will vary by country, state, region and even by function, with our primary focus on the health and safety of our employees. We will take a careful and incremental approach, given the potential for new exposures. When our employees do start to return, it will be by invitation rather than requirement, and appropriate testing, social distancing, and access to protective equipment will be in place.
I hope this update is helpful – if you have additional questions or want more information, please do not hesitate to contact us. We hope that you, your families and your teams remain healthy and safe.
As I’ve said before, there are two things we know about all crises: each one is different, and they all end. This too shall pass.
Sincerely,
Cyrus Taraporevala
1,2 State Street Global Advisors Institutional Client Group, as of April 2020.
3 State Street Global Advisors Q1 2020 ETF Market Insights.
4 Bloomberg, 3/11/2020.
5 Bloomberg Finance L.P., as of 1/10/2020. Based on 180 day dollar trading volume and geography focus of US Equities. Past performance is not a guarantee of future results.
6 State Street Global Advisors SPDR Research, as of 2/28/2020.
7 State Street Investor Relations; State Street Global Advisors Q1 2020 Quarterly Business Update.
Products referenced in this piece are not available in all regions. These references are provided for illustrative purposes only. The content of this web page should not be considered a recommendation to invest in a particular sector or to buy or sell any security mentioned.
The above-referenced SPDR S&P 500 (SPY), fund has not been registered for sale in or listed on any market outside of the United States, nor has any regulatory authority outside of the United States approved the sale or distribution of the funds. Persons wishing to invest in the SPDR S&P 500 (SPY), fund should satisfy themselves as to full observance of the laws of the relevant territory in which they are resident in connection with any such investment.
Investing involves risk including the risk of loss of principal. The views expressed in this material are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. All statements, other than historical facts, contained within this document that address activities, events or developments that SSGA expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions and analyses made by SSGA in light of its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances, many of which are detailed herein. Such statements are subject to a number of assumptions, risks, uncertainties, many of which are beyond SSGA’s control. Please note that any such statements are not guarantees of any future performance and that actual results or developments may differ materially from those projected in the forward-looking statements.
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Exp. Date: 05/31/2021