State Street Global Advisors is the fourth-largest asset manager (by AUM) in the world, a pioneer in indexing and quantitative investing, and the creator of many of the world’s first exchange traded funds (ETFs), with total assets under management of $4.1 trillion as of December 31, 2021.

Serving some of the largest and most sophisticated pension plan sponsors, endowments and foundations, sovereign wealth funds, central banks, and financial intermediaries, we provide investment solutions across the risk-return spectrum, covering all major asset classes, investment styles, and vehicles.

By considering all material drivers of risk and return, we take a broad yet targeted approach to improving our clients’ long-term investment performance. We do this by working with clients to understand their unique needs and objectives, and applying our disciplined, rigorous, research-based approach to help them meet their wide range of investment goals.

During the strong equity bull market run of 2021, a year which also saw persistently low interest rates and the return of long-dormant inflation, one of the most important roles Global Advisors continued to play for our clients was to help them protect and grow their capital in a new and more unpredictable investment landscape.

PERFORMANCE

At Global Advisors, we executed well against our long-term strategy, which contributed to a number of records for the business in 2021, including revenues, assets under management, and ETF inflows.

Importantly, Global Advisors’ full-year pre-tax margin expanded by more than 6 percentage points in 2021 to a record 32 percent, deepening the value of our investment management franchise to State Street.

Investment performance was strong across the spectrum of investment capabilities in 2021, particularly for our Active Quantitative Equities strategies, Active Fixed Income strategies, and Tactical Asset Allocation portfolios. In our index portfolios, 99 percent of our strategies were within their stated tracking bands, indicating that client portfolios achieved their target market exposures to support their long-term portfolio objectives.

Actively managed portfolios navigated a challenging year successfully, with nearly two-thirds of our active portfolios outperforming their benchmarks. Assets under management increased 19 percent year-over-year to $4.1 trillion, driven by very strong equity markets and net flows. We reached total net inflows of $196 billion across our ETF, cash, and institutional businesses, including record ETF net inflows of $107 billion.

In the US, the SPDR Blackstone Senior Loan ETF was the No. 1 active ETF in the industry for net flows. In Europe, our SPDR Bloomberg SASB US Corporate ESG UCITS ETF gathered in excess of $5.7 billion in 2021. Full-year management fees were more than $2 billion, up nine percent from 2020, reflecting robust new business and higher average equity market levels, more than offsetting money market fee waivers.

ETF INNOVATION

Innovation is in our DNA. Indeed, our launch of the industry’s first ETF, SPDR® S&P 500® ETF Trust (SPY), exemplifies our pioneering heritage. Developed in 1993 in partnership with the American Stock Exchange, and now with more than $400 billion in assets, SPY is not just the oldest and largest ETF, it is also the most liquid, and trades $31 billion daily on average, at a sub-penny-wide spread. In 2021, we expanded our suite of fixed income ETFs, including the launch of our first actively managed municipal bond ETF, the SPDR Nuveen Municipal Bond ETF (MBND).

Reflecting our clients’ growing interest in ESG investing, we were active in developing six new ESG-related index ETFs designed to meet our clients’ ESG and fundamental investment criteria in markets worldwide.

We also continued forging strong partnerships with third-party managers to bring active ETFs to market, as demonstrated by our recent launch of the SPDR Loomis Sayles Opportunistic Bond ETF (OBND), which provides exposure to a mix of investment-grade, high-yield, non-US-dollar-denominated debt, leveraged loans, and securitized issuers.

SETTING THE STANDARD FOR ESG PROGRESS

Building portfolio resilience and sustainable growth

Material ESG considerations are integral components of long-term risk-adjusted investment returns and represent another way in which we can unlock greater value for our clients. For us, these issues are matters of value, not values — opportunities for companies in our portfolios to mitigate downside risk, innovate, and differentiate themselves from competitors.

An increasing number of clients recognize the importance of responsible growth, fueling demand for more sophisticated ESG strategies. In 2021, we won $28 billion in ESG mandates and were responsible for more than half a trillion dollars in ESG assets worldwide.

To meet clients’ evolving needs, in 2021, in addition to launching several ESG-related ETFs, we introduced other ESG-focused products, including the Global High Yield Bond ESG Screened Index strategy, State Street Sustainable Climate Bond strategies, and the World TPI Climate Transition Index Equity strategy.

We also launched the Opportunity Class, a new money market fund share class to benefit philanthropic organizations whose values align with our commitment to racial equity and social justice.

Recognizing our expertise in integrating ESG factors into our investment processes, St. James’s Place selected us to co-manage their £14 billion Global Equity Fund, which was adapted to better align with the firm’s criteria for responsible investing and its net-zero commitments. And, as more investors commit to reaching net zero, we are well positioned to help them implement meaningful and measurable transition strategies.

Raising the bar on asset stewardship

As long-term stewards of our clients’ assets, we are committed to fully evaluating the ESG issues that are material to a company’s ability to generate sustainable growth. We believe we have a fiduciary responsibility to use our voice and our vote to drive change when it comes to all aspects of ESG, and in 2021 we focused on climate, diversity, and governance.

As climate change poses one of the most serious risks to long-term investors, we continued to call upon our portfolio companies to disclose their climate risks according to the framework from the Task Force on Climate-related Financial Disclosures (TCFD) and report on the progress of their transition to net-zero emissions and how that impacts their businesses.

To further raise awareness of this issue, and to help investors effectively manage the transition risks, we joined the Net Zero Asset Managers initiative, a coalition of asset managers committed to reaching net-zero greenhouse gas emissions by 2050 or sooner. Our pledge aligns with our deep-rooted commitment to drive long-term value on behalf of our clients.

In addition to the impact of climate change on sustainable value creation, we also believe issues like diversity, board leadership, and human capital management directly contribute to a company’s value.

Now in its fifth year, our Fearless Girl initiative continues to build awareness and deliver results in bringing more female representation onto boards and into the workplace. Since 2017, of the 1,486 companies we had identified as having all-male boards, 948 have since appointed at least one female director as part of their leadership team. Indeed, in 2021, every company in the S&P 500 had a least one woman on its board.

In the past year, we partnered with Russell Reynolds and the Ford Foundation to produce an in-depth study on how corporate boards approach the oversight of racial and ethnic diversity, equity, and inclusion (DE&I). The study provided a view into boardroom discussions and offered a road map for how companies can more effectively manage and mitigate risks related to racial and ethnic DE&I matters. With human capital management now widely viewed as both a risk and opportunity for employers in the wake of the pandemic, we have also published guidance for effective disclosures and practices.

We also engaged our portfolio companies on corporate governance issues such as board tenure, pay, and refreshment. Along with board diversity, our stewardship is guided by the belief that strong, capable, and independent boards exercising effective oversight are the foundation upon which long-term shareholder value is created.

TOWARD A MORE SUSTAINABLE AND INCLUSIVE FUTURE

Global Advisors will continue to seek to deliver growth for our investors, and leverage our scale, expertise, and relationships to further develop innovative solutions to help clients generate long-term, risk-adjusted returns.

We will continue to reinforce our positions in areas of competitive strength, including as a world-class ETF franchise; a global ESG leader in institutional and ETF markets; a global leader of index and systematic investment capabilities and cash as well as select active and multi-asset capabilities; and an eminent Outsourced Chief Investment Officer (OCIO) solution provider.

The roles our people and culture serve in creating value for our clients and our business cannot be overstated; hence attracting, cultivating, and retaining the best talent in the industry will remain a top priority.

Solving investment challenges for our clients is a catalyst for our continuous innovation. Most importantly, we will stay focused on delivering long-term risk-adjusted returns for our clients and those they serve, while helping them capitalize on new investment opportunities on the path toward a more sustainable, diverse, and inclusive future.