James Ross, senior managing director and global head of State Street Global Advisors’ exchange-traded funds business, says the firm is redoubling its sales, marketing and product-development effort in Asia-Pacific.
Visiting from Boston, Ross acknowledges that after SSgA notched successes in the region, notably the 1999 establishment of the Hong Kong Tracker Fund, “We didn’t stay as active as we should have.”
He says, however, that the firm has begun putting more resources into the region following his ascension to the global role for SSgA’s SPDR line of ETFs.
Ross has been involved in building SSgA’s ETF business from the beginning, having worked on the 1993 launch of the world’s first ETF, the SPDR S&P500. SPDR stands for Standard & Poor’s Depository Receipt. The ETF tracks the S&P 500.
It remains today the world’s biggest and most liquid ETF, with about $1 trillion of assets. SSgA cross-listed the SPDR S&P500 on the Tokyo Stock Exchange two weeks ago without ceremony, opting to keep it low key given the tragic disasters in Japan.
Cross-listing success stories from the United States (including SPDR Gold Shares, which appeared in Singapore in 2006 and in Hong Kong and Tokyo in 2008) is one part of Ross’s strategy.
“We talk a lot about creating local product, but many investors in Asia want US ETFs, because they have more liquidity,” he says.
The challenge for Asia, particularly in Hong Kong, is less about getting another monster product like the Tracker and more about building the local investor base.
SSgA is now hiring a regional sales team that will report to Frank Henze, who joined in November from HSBC to run the ETF business for Asia-Pacific. The team will include people in Hong Kong, Tokyo and Sydney, where SSgA already has ETF-dedicated personnel.
Ross notes the firm has been involved in Asian markets for over a decade. “We’re putting the pieces together better, as a committed business,” he explains.
In Asia, product development is important, but even more critical is client education and marketing. In Europe, by contrast, the emphasis is more about product.
Ross agrees that without an advisory-driven model in most Asian markets, it will be a challenge to sell ETFs to retail investors. “We don’t need 20% year-on-year growth,” Ross says. “We need something more measured. I can tell you ETF growth in Asia isn’t going to be just 3%: it’s a big opportunity.” The advisory market in the US is only 40% of that business, he adds.
The client base in Asia-Pac varies by country. In Japan, it’s mostly a retail business based around online discount brokerages. In Australia, superannuation funds and an advisory-driven retail market are becoming big users of ETFs. In Hong Kong, the business is mostly institutional.
SSgA is about to launch a range of 18 ETF products in Dublin, which will create a non-US platform that it will be able to market to Hong Kong, Singapore and other Asian jurisdictions. This will also allow it to get around the problem of capital gains tax on US-domiciled ETFs.
“Last year was a building year for us,” Ross says of the Asia effort. “Now we’re putting in place a bigger sales team and we’ll be re-establishing the brand.”