State Street Corporation's (NYSE:STT) new fund, the SPDR SSgA Risk Aware ETF, is designed to provide investors with competitive returns, compared to the broad U.S. equity market, and capital appreciation.
“The SPDR SSGA Risk Aware ETF (NYSEARCA:RORO) is targeted at providing investors an innovative solution for capitalizing on risk-on and risk-off fluctuations in the US equity market,” said Scott Ebner, senior managing director and global head of product development and research at State Street Global Advisors, in a statement.
Managed by SSGA’s Active Quantitative Equity Group, the fund will employ their quantitative market risk measurement model to identify, quantify and benefit from risk factors moving the markets at any given time.
The Fed intends to impose a capital surcharge on banks tougher than the international standard, according to Fed Governor Daniel Tarullo's prepared remarks for the Senate Banking Committee. Those banks with heavier reliance on short-term funding like overnight loans - i.e. Goldman Sachs (GS -1%) and Morgan Stanley (MS -1.8%) - will likely face even more rigorous requirements.
Officials haven't yet decided on a number, but reportedly are considering as much as 200 basis points more than the top range of 2.5% of risk-weighted assets agreed to by international regulators.
What's not yet clear is who would need to raise capital to meet the new, tougher standard.
Citigroup (C -1%), Bank of America (BAC -0.6%), JPMorgan (JPM -1.3%), Wells Fargo (WFC -0.4%), State Street (STT -1.1%), Bank of New York Mellon (BK -0.9%)
Aiming to boost its oversight of asset managers - mutual funds, hedge funds, private-equity - the SEC is prepping new disclosure rules supposedly to allow the agency to better assess whether the companies pose systemic risk.
The top 5 firms are: BlackRock (BLK), Vanguard, State Street Global Advisors (STT -0.1%), Pimco (OTCQX:AZSEY -0.3%), and Fidelity.
Among the concerns are some mutual funds' use of derivatives to boost returns, reports the WSJ, citing sources at the SEC.
Another issue down the road could be the SEC requiring living wills along the lines of what's been ordered from the largest banks (a fiasco to this point).
The large asset managers had previously been under scrutiny by the Financial Stability Oversight Council to possibly be labeled as SIFIs, but the FSOC backed down this summer amid a heavy lobbying push by the big players.
U.S. regulators have approved of the proposed liquidity rules to safeguard banks in case of a financial crunch.
The rules are requiring large U.S. banks to load up on ultra-safe assets to ensure enough cash and securities to fund their operations for 30 days. Separate liquidity rules for foreign banks will be drawn up at a later date.
Big banks will need to hold a total of about $2.5T in easy-to-sell assets by 2017, which would result in a $100B shortfall if the threshold applied today.
Bank regulators are expected to finalize rules today that would require banks to hold capital against every asset on their books, and approve of a "liquidity-coverage ratio", which would require large banks to load up on ultra-safe assets to fund their operations for 30 days.
The new rules have Wall Street concerned due to the likely harm to earnings and lending restrictions, although regulators say the policies will create a safer financial system.
Bank officials, trade groups and lawmakers are quietly pressing the Federal Reserve for a delay of up to seven years regarding the rule that limits their investments in private-equity and venture-capital funds
The "Volcker rule," part of the Dodd-Frank legislation, restricts banks' ownership stake in hedge funds and private equity funds, and prohibits banks from making speculative bets with their own money.
Regulators finalized the rule in December but agreed not to enforce it until 2015.
The Federal Reserve and the FDIC say the bankruptcy plans submitted by 11 of the largest banks make "unrealistic or inadequately supported" assumptions and "fail to make, or even to identify, the kinds of changes in firm structure and practices that would be necessary to enhance the prospects for" an orderly failure. Ouch!
To review: Dodd-Frank requires banks annually submit a "living will" detailing their operations and exposures and how they could be dismantled without the need of a bailout in the event they near failure. Pleasing the regulators is a must as they have the power to force tougher capital rules or restrictions on growth, or even mandate a breakup of the lenders. As for the current failures, the banks have about a year to address D.C.'s concerns.
"Despite the thousands of pages of material these firms submitted, the plans provide no credible or clear path through bankruptcy that doesn't require unrealistic assumptions and direct or indirect public support," says the FDIC's #2 official, Thomas Hoenig.
State Street (STT +0.4%) will pay $60M to settle a shareholder lawsuit stemming from 2009 charges that the custodial bank overcharged clients for foreign exchange transactions. Shareholders weren't wronged by the forex markups, but claimed damages thanks to the decline in State Street's stock amid the 2009 suit.
BlackRock's (BLK +1.4%) iShares lineup took in an estimated $21.4B in net deposits in Q2, beating Vanguard's $18.2B, according to Bloomberg. IShares funds focusing on emerging markets brought home $8B, including $5.9B for the MSCI Emerging Markets ETF (EEM).
Before Q2, BlackRock - the ETF industry's largest ETF provider - had lost share to Vanguard for four of the previous five quarters.
State Street (STT +0.9%) had seen net redemptions in Q1, but was able to bring in $8.3B in Q2. The company is especially sensitive to flows in and out of the giant SPDR S&P 500 ETF Trust (SPY), which accounts for 40% of its U.S. ETF assets.
Invesco's PowerShares QQQ Trust (QQQ) saw heavy redemptions of $2.9B even as it returned 7.2%.
Having exited his holdings in State Street (STT +0.2%) late last year, Nelson Peltz has set his sights on Bank of New York Mellon (BK +3.8%), with his Trian Fund Management disclosing a 9.33M share stake in the company.
Partly in response to pressure from Peltz, State Street is perceived to have been more aggressive than Mellon Bank in cutting costs, selling off non-core units, and in prioritizing capital returns over acquisitions. The stocks of the two companies, however, are each up about the same amount since Peltz began pushing for change at State Street in late 2011.
With more than $998B in its iShares business, BlackRock (BLK) is on target to topple its upcoming $1T mark, although the company still faces market competition from rivals Vanguard and State Street (STT). The two offer investor-friendly and low-cost investing, attracting a large part of the market segment.
Vanguard secured 43% of the new money in the ETF market this year, pulling in $30.3B, compared to Blackrock's 35% share, which received $24.7B.
Blackrock is still highly unlikely to be surpassed anytime soon due to its sheer size, although new market share percentage is beginning to favor rivals. The asset manager tripled the size of its iShares business in the last five years, after purchasing it from Barclay's.
After eight months on the market, Fidelity's ten sector ETFs have crossed over $1B in AUM, with the MSCI Information Technology ETF (FTEC) and the MSCI Energy Index ETF (FENY) seeing especially strong interest.
All ten charge annual expenses of just 0.12% - lower than the competition from the likes of Vanguard, BlackRock (BLK), and State Street (STT) - but higher trading volumes from those three's offerings make for lower trading costs.
Like Vanguard's VDE, the Fidelity offerings hold many more companies than those from BlackRock and State Street. The FENY, for example, has 166 stocks vs. the IYE with 84, and 44 for the XLE.
State Street Corp provides a range of investment management strategies, investment management advisory services and other financial services for corporations, public funds and other sophisticated investors.