State Street at BAML Conference Notes

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State Street (STT) Presents at Bank of America Merrill Lynch Banking & Financial Services – Conference
Ronald O’Hanley – Chief Executive Officer, State Street Global Advisors

There’s a shift to outcomes investing

“this is the only industry I can think of where you can actually show up in a meeting and actually have lost the client money and saying good news, we outperformed. Right, it’s just a bizarre way, if you think about it that we’ve grown to serve our clients over the years. There is more and more towards this outcome and solutions investing. You’re seeing it started in the institutional space and you’re seeing it more and more even in the retail space as you think about packages that are aimed at and packaging that’s aimed at achieving a desired outcome, and not just putting together different products.”

Many states and municipalities are functionally bankrupt when it comes to their pension plans

“Many of these States if they were measured, but certainly the municipalities if they were measured on any kind of a GAAP accounting are functionally bankrupt and at some point there will be the situation where States and municipalities start to challenge some of these obligations or simply can’t meet the obligations that will accelerate the move from DB to DC, but what that’s done is, if you think about it at its core, it’s shifted risk from the professionals, a small number of professionals to a large number of people that don’t know what they’re doing and have no idea that they’ve taken this risk on.”

Smart Beta is an area of growth

“Second area of growth is what I called earlier, this beta revolution. Alternatives is not near term for us, we’re doing a lot of the R&D there and we see two or three years out. Lots in that, but smart beta, we’re the leader in that. 20 billion in new smart beta assets over the last 18 months and that’s without really being able to tell our story in a coherent way, we’ve done that, we’re at the point now, we’re both on a customized and packaged basis, we can put more of that out. So, I see growth in that and then some of the areas we’ve already talked about.”