Australia: a key hub in State Street’s global network
July 2011
Since arriving in Sydney in the mid-1980s, the global financial services firm State Street has watched the Australian financial services sector evolve to become one of the most dynamic and fastest growing markets in the world and its Sydney operation become a strong regional hub and centre of excellence.
With nearly 30,000 employees in 26 countries, Boston-based State Street is one of the world’s largest and most sophisticated financial services organisations. It offers a full range of institutional financial services and products through its global networks, and each day approximately 15 per cent of the world’s tradeable securities pass through its systems.
The company entered the Australian market in 1986 when it opened an office of its State Street Global Services business, providing global custody services to Australian clients.
According to Mr Ian Martin, senior vice president, head of State Street Global Services for South East Asia and Pacific and head of Global Markets for Australia and New Zealand, the company’s entry into Australia was spurred by the country’s growing investment market.
“Australian investment management firms and pension funds were recognising the need to outsource their custody and fund administration roles,” Martin says. “We realised that we had the opportunity to provide some of those services here. And we performed well quickly with a relatively new type of business structure.”
Seeking further success, State Street’s two other operating divisions soon followed. The rapid growth in Australian investment activity in the late 1980s led State Street to open an Australian office of its investment management business, State Street Global Advisors. This division was significantly boosted by the introduction of compulsory superannuation for Australian workers from 1992 and the resulting explosive growth in Australia’s superannuation assets.
The opening of the Australian banking market in the early 1990s saw State Street become the first American bank to be granted a licence to open a full bank branch in Australia in 1994. State Street Bank & Trust’s business continues to offer services such as foreign exchange, trading, securities lending, portfolio solutions, transition management and a broad suite of electronic trading capabilities.
Martin says Australia’s robust economy, democratic systems and its mature legal and regulatory frameworks make it a very good place to do business. So too does the strength and sophistication of Australia’s financial services sector.
Growth and sophistication in investment management drives business opportunities
Every area of State Street’s principal business activities is represented in Australia, delivering a full range of services to both Australian organisations and the Australian offices of multinational clients.
“Australia punches above its weight significantly in terms of investment management,” says Martin. “It has the fourth largest pool of assets in the world, which is completely disproportionate to the size of the Australian population. This has seen the development of a very successful, highly-skilled and highly-sophisticated investment management landscape.”
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State Street's new Sydney premises.
Image courtesy of State Street.
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Martin says the result is a market with leading-edge financial services requirements, and a subsequent need for innovative products and services.
It is a market within which State Street can thrive, and it has gone on to become one of Australia’s largest providers of Exchange Traded Funds (ETFs). Since launching its first ETF in 2001, it has grown to hold more than A$2.9 billion in funds under management across its suite of local ETFs.
“We have a dominant market share and have been very much a market leader in bringing those products to Australia. They are a big focus for our asset management business and have shown exciting growth over the last couple of years due to the significant growth in self-managed superannuation here.”
The continued growth of Australia’s superannuation sector also represents a significant opportunity for the company. In late 2010 State Street won a contract to provide custody and fund accounting to REST Industry Super, one of Australia’s largest superannuation funds by membership. Martin says this is a springboard that will launch State Street further into that market with its full range of services, along with its capabilities in trading, securities lending, and transition management.
“The big opportunity and the strategic imperative for the organisation at large is really servicing that superannuation sector which is growing at 12 per cent per annum, so it is absolutely essential that we are here.”
Global operations benefit from Australia’s innovative business solutions
But Martin says Australia is more than just a market opportunity for State Street. Its Australian operation has also been a driver of innovation back into the global organisation, particularly for its ability to provide taxation solutions to investor clients.
“The Australian marketplace is home to very sophisticated clients. We have to match that level of sophistication in terms of the type of servicing requirements that we have, and that’s helped drive our business all around the world.”
Local capabilities have also translated into specific products for international markets, taking expertise developed in Australia to the rest of the world.
“Australia has a highly educated workforce. We’ve learnt a lot here in this market and this has been translated in some of the things that we have done elsewhere. We’ve built capabilities around capital gains tax which we have been able to leverage in other regimes. So the Australian business is certainly a good hub for innovation for the organisation,” says Martin.
Asia-Pacific base leading the global growth charge
State Street’s Australian operation also acts as a bridge into Asian markets, by providing a base within the Asian time zone that is attuned to US culture, language and business practices. Many of State Street’s regional responsibilities reside in Australia, including the heads of numerous business and corporate functions, and this will see Australia playing a key role in State Street’s ambition to double its non-US revenue by the end of 2014.
“Asia-Pacific is seen as being very much the growth area, and Australia has some known growth opportunities in terms of the investment landscape. And that really creates opportunities for all of our businesses servicing institutional investors,” says Martin.
Today State Street employs more than 720 staff in Australia and has recently relocated to new premises in the heart of Sydney’s central business district. The new building has been awarded a 5-star Green Star accreditation and features rainwater harvesting and high efficiency lighting.
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