Ronald O’Hanley, new president and CEO of State Street Global Advisors, thinks trends in investment management are going SSgA’s way, including the move from active management to indexing.
O’Hanley, who was most recently president of asset management and corporate services at Fidelity Investments, says $2.45 trillion SSgA is well positioned with its passive strategies, which include a well-known exchange-traded fund lineup, and its defined contribution retirement business, which is fueling much of the growth in indexing. As investors develop portfolios of index funds, their returns are more tied to asset allocation than to an active manager’s ability to outperform.
“I think the new active, as I would describe it, is in asset allocation,” says O’Hanley, 58. “As more and more investors are using these highly developed investment building blocks, they need to put them together in an asset allocation model.” Boston-based SSgA will be working to expand its existing asset allocation capabilities, including proprietary models for all types of advisers.
O’Hanley succeeds Scott Powers, who had run SSgA since 2008 and is now retiring. Before joining Fidelity, also headquartered in Boston, O’Hanley was president and CEO of BNY Mellon Asset Management and had been with the bank and its predecessor, Mellon Bank, for 13 years. (Bank of New York and Mellon Financial Corp. merged in 2007.) He previously spent more than a decade with McKinsey & Co., where he founded the consulting firm’s investment management practice.
SSgA is also doing research and working with clients on so-called alternative beta. O’Hanley says he expects alternative investments to undergo the same kind of transformation that occurred in traditional money management. With traditional investments, research shows that active managers’ returns have often been owing to factors that can be isolated, such as value and growth; investors now often use passive strategies to gain exposure to these factors. SSgA is researching the source of returns in the alternatives world. “These are calculable problems,” O’Hanley says.
The new SSgA boss is looking to leverage more of the research and development being done outside of the firm, including parent State Street Corp.’s custody operation. Big data is one example. In 2013, State Street launched a group called Global Exchange to help outside investment managers better understand and use the vast amount of data they store. “Lots of people talk about big data, but this place has been doing that for a long time, and that puts us light-years ahead,” O’Hanley asserts.
Although SSgA is best known for passive investing, he wants to bring more attention to the firm’s active strategies. SSGA plans to put its active managers into multiasset funds as a more opportunistic complement to passive. O’Hanley says there’s plenty of growth in investment management, despite the “hand-wringing going on about the shrinkage in active mutual funds.”