State Street Survey Reveals A Bright Future for Both Digital Assets and Semi-Transparent ETFs in the US
December 11 2019 - 2:17PM
Business Wire
Survey provides 2020 Outlook on Trading Technology &
Outsourcing, Financing and Global Markets
As part of a wide ranging 2020 industry trend outlook, a survey
of US asset managers and asset owners conducted by State Street
Corporation (NYSE: STT) predicts continued prevalence of digital
assets as well as a bigger role in the industry for
semi-transparent active ETFs.
Given the more supportive regulatory stance the Securities and
Exchange Commission (SEC) has recently taken toward
semi-transparent active ETFs, many respondents now see a much
bigger role for these vehicles in the market. Nearly half (47%) say
semi-transparent ETFs will play a significant role in their firm’s
future portfolio strategy. Similarly, 46 percent of respondents say
these products will help to stem the flow of assets from active
investments to passive.
“The survey supports what we have anecdotally believed for some
time - the future is bright for active equity ETFs, as well as
firms seeking to outsource trading activities and increase
allocations to digital assets-related investments,” said Nadine
Chakar, global head of State Street’s Global Markets business unit.
“It’s an exciting time for technology and innovation in the
industry, and ultimately investors will benefit from new
technologies and a wider range of choices for constructing
portfolios.”
Additional highlights of the survey include:
Digital Asset Strategies:
Digital assets continue to come a long way in gaining
credibility among institutions, with only six percent of survey
respondents reporting that they have no digital assets-related
investments and no plans to invest in the next year. The survey
also found:
- 38% will increase their allocation and 45% will maintain the
same allocation. More than two-thirds (69%) of the largest firms
plan to boost allocations of this asset class.
- 45% say the tokenization of traditional assets will be a
massive disruption to the market within the next five years.
However, 55% say tokenized assets’ inherent risks are too great for
widespread institutional adoption.
- 45% believe a bitcoin ETF (or other cryptocurrency ETF) will
receive regulatory approval and launch in 2020.
- Respondents cite myriad benefits of tokenization including:
improvement of risk management (62%) and transparency (55%),
enhanced security (55%), and democratization of investing for
retail investors (36%). Only 4 percent see no benefits from
tokenization.
Seeking Alpha:
When discussing trading technology upgrades planned for their
organizations in 2020, blockchain/DLT (62%) and AI/machine learning
(50%) are taking priority among respondents as key investments,
followed by robotic process automation (31%) and natural language
processing (24%). Additionally, more than a quarter (27%) plan to
increase the amount of trading they outsource.
When polled on financing trends:
- 50% say their firm is investigating cleared repo, securities
lending and new trading solutions.
- Only 44% say they are prepared for the new collateral
requirements under the Uncleared Margin Rules.
- 65% say DLT will improve financing solutions in the future. 59%
say the same of AI.
- Nearly a third of respondents (30%) cited Social Media/web
scraping as the most popular alternative data source for providing
a competitive edge, followed by credit/debit transactions (22%),
ESG metrics (20%) and geolocation/satellite data (16%)
Global Market Outlook:
When polled on state of the markets, approximately one third
(32%) have a bearish global markets outlook for 2020, but the
largest institutions seem more sanguine than smaller ones with 57
percent larger asset managers are very or somewhat bearish and 67
percent of smaller players are very or somewhat bullish.
About State Street Corporation
State Street Corporation (NYSE: STT) is one of the world's
leading providers of financial services to institutional investors
including investment servicing, investment management and
investment research and trading. With $32.90 trillion in assets
under custody and administration and $2.95 trillion* in assets
under management as of September 30, 2019, State Street operates
globally in more than 100 geographic markets and employs
approximately 40,000 worldwide. For more information, visit State
Street's website at www.statestreet.com.
*Assets under management include the assets of the SPDR®
Gold ETF and the SPDR® Long Dollar Gold Trust ETF (approximately
$44 billion as of September 30, 2019), for which State Street
Global Advisors Funds Distributors, LLC (SSGA FD) serves as
marketing agent; SSGA FD and State Street Global Advisors are
affiliated.
State Street Corporation
One Lincoln Street, Boston, MA 02111
© 2019 State Street Corporation - All Rights Reserved
2868514.1.1.AM.RTL
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Brendan Paul +1 401 644 9182 Bpaul2@statestreet.com
@StateStreet
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