(Bloomberg) – The first ETF to bring private assets to the masses was intended to be a milestone this year with a push to shake off State Street Corp.'s reputation for being cautious and boring.
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Hung is tasked with reviving State Street Global Advisors' desire for innovation, and revolutionised investment 30 years ago by creating America's first exchange trade fund. Before arriving in 2022 as SSGA's CEO, the company had spent years carefully trying to avoid repeated explosions during a major financial crisis. Under Hung, State Street's $4.7 trillion asset management division created around 100 new funds in 2024, and now they're experimenting with something really novel.
Instead, last month's launch of a private credit ETF in a partnership with private equity giant Apollo Global Management Inc caused rare public responsibilities from US regulators who cited SSGA for throwing it into the market, citing its SSGA, and questioning its liquidity, transparency and even its name.
The hangs are not shaky. At the end of last week, SSGA, the world's fourth-largest asset manager, deployed another pioneering ETF, this time in partnership with Bridgewater Associates, the world's largest hedge fund.
“That's resolved,” Hung said in an interview with the SPDR SSGA Apollo IG Public & Private Credit ETF. “This is an innovation in behavior,” she said, wanting to learn more, and there is “big” interest in private credit funds from clients with high trading volumes.
Early Results
Still, since its debut at the end of February, ETFs have only had a net inflow of around $5 million. And despite the fast pace of last year's launch, SSGA's new ETF tally was not ranked among the top 10 in the industry by company.
For Hang, who played a leadership role at New York Life Insurance and Morgan Stanley, such hiccups are not serious when trying to build momentum. Her tenure so far has been marked by recruitment and departures, restructuring and public approval that SSGA must start moving faster and more creatively. She is pushing for growth in wealth spaces and regions, including Europe and Saudi Arabia, and says SSGA is shopping for stocks in private credit companies.
The Boston-based company has lost much of its Mojo for almost 20 years due to scars left from the crisis era. The collapse of the State Street Mortgage Debt Fund resulted in federal sanctions in 2010, with approximately $650 million in reparations. The result was a risk-averse culture that would transfer leadership to rivals in the booming ETF field.
Previous operations executives said employment has leaned further for the coming years to fill positions in the legal, risk management and compliance sectors. Resources are scarce and can get frozen mid-season, making it difficult to support new funds and projects and expand them quickly, they said.
Approval pain
The approval process has become a unique form of pain. Even simple proposals would have to clear multiple committees, and in many cases, rivals already had their own versions before new initiatives were approved, the former employee said.
Spending in many areas is tougher than peers such as BlackRock Inc., former executives said. Innovation replaced processing, and “boring” became a popular compliment as DNA that suited the parent company's stable mood spills over the ranks of asset managers.
The company grew as ETFs became more popular, but it grew slowly than its major rivals. In the time it took for SSGA to move from $2.4 trillion to $4.7 trillion in assets in the decade ended in 2024, BlackRock and Vanguard each added more than $6 trillion each, with Fidelity Investments going from about $2 trillion to $5.9 trillion.
Even SSGA's iconic S&P index fund, known for its spy ticker, fell behind in the competition. Last month, Vanguard's $586 billion S&P 500 ETF (launched about 15 years ago) oversaw SSGA's 1993 offering, with the two moving back and forth between leads.
Speed Push
Against this backdrop, the company has devised a new private credit fund with Apollo as its manager. It was a process that sometimes highlighted internal tensions between staff who supported more speed and those who called attention.
According to people familiar with fund creation, some team members were hoping that something was changing in the slow culture of SSGA, with Hung's push to bring the fund to the market. But while it took longer than a typical ETF launch, some people said they still worry that the company is too fast and endangering objections from the Securities and Exchange Commission.
Certainly, the SEC had public issues with the fund on the launch day, indicating that it didn't think all concerns had been resolved.
In a three-page letter, the SEC criticized the fund's sole dependence on bids from Apollo, which could raise doubts about the true value of the assets, and expressed concern about its liquidity. The name is misleading and should be changed, the SEC said it is neither an advisor nor a sponsor given its limited role Apollo actually operates or sponsors the fund.
Regarding the fund's agreement with Apollo, the copies sent to the SEC for review by SSGA were so compiled that “the important terms of the contract have not been made public,” the SEC said.
Make adjustments
Wanting to protect their own information, SSGA responded by sending unedited copies and agreeing to tweak the name. SEC staff said there was no further comment “at this time” to the fund's lawyers, and the transaction is moving forward, with the ETF holding approximately $55 million in assets.
Representatives from the SEC and Apollo declined to comment.
In an emailed statement, SSGA said there was no internal discord with the company. State Street CEO Ronald O'Hanley said in an email that Hung and SSGA “providing democratization of collaboration with partners like Apollo and access to private assets.”
SSGA launched around 20 new ETFs in the US last year, but most remain small by industry standards. SPDR Bloomberg's biggest boosted Roll Roll Relieg Commodity Strategy manages around $400 million, but it's not over $100 million, according to data compiled by Morningstar and Bloomberg. Some manage under $10 million. The SPDR Bridgewater All Weather ETF has been trading in less than two weeks and holds approximately $53 million.
“We're talking about early days,” Hang said. “It takes time to build that AUM flow and we cannot forget that this market is extremely unstable.”
– Support from Laura Benitez and Nicola M. White.
(Update using Bridgewater ETF assets on the last screen)
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