Katherine Lucas: Market volatility, margin compression, increased regulation and cost pressures. Investment managers we're seeing are facing a myriad of challenges. And today I'm here with Tony Bisegna and Dan Morgan to discuss a little bit about how we're working to develop solutions to address some of these issues. So, Tony, I want to start with you. What is State Street doing about this for our clients from a trade life cycle perspective?
Tony Bisegna: Well, we've always had a history of partnering with our clients and trying to provide solutions for them. And in this particular case, one area where I think we can help them, the buy side, is with the trading activities. And outsourced trading is a new trend that's been coming into the marketplace. It's been around for a long time and into small pieces, supplemental trading, augmenting liquidity for buyside firms. But it's really coming to full bear now where the buy side is looking to outsource those activities as well as middle office and other activities. So we're leaning heavily into outsourced trading to help solve that problem for them. And it fits very nicely into our Alpha strategy too. With the middle office services, we can provide client with the outsourcing that they can outsource their trading as well.
Katherine Lucas: Dan, you're out there every day, right, with our clients. What are the top strategic business drivers when considering outsourced trading?
Dan Morgan: If I were to bucket themes, I would bucket them into three categories. Number one, efficiency and access to liquidity. Number two, growth and number three, expense optimization. From an efficiency and access to liquidity perspective, clients often ask themselves questions like Am I accessing markets efficiently? And for things like asset classes around the margins, like emerging markets, exchange traded derivatives and even international markets where clients employ night trading desks. From a liquidity perspective, just as well. Do I have access to the right liquidity for what I'm trying to accomplish from an investment perspective and what I benefit from a professional who has essentially has the resources to build and maintain a large stable of counterparties across asset classes from a growth perspective, is my trading desk set up efficiently for the growth that I'd like to achieve within my firm? If I am a traditional equity manager, do I want to expand internationally? If I am a fixed income manager, do I want to get into the equities class? Do I have the opportunity to hire a portfolio management team and quickly be able to set them up with trading infrastructure that allows them to do their job efficiently? Am I an asset owner that is looking to take investments in-house and am I starting from scratch from a trading infrastructure perspective? With respect to expense optimization, I have resources that are dedicated to my trading infrastructure and are some of those resources better served utilized for generating alpha or excess return and or potentially adding to distribution resources, both of which are designed to increase the top line of the firm.
Katherine Lucas: I love this. It strikes me that this is much more than just a way to minimize the overhead costs associated with trading. With trading. This seems to me that this is an extension of our clients current trading capabilities. Am I right in that thinking?
Dan Morgan: Certainly our purpose in any outsourcing relationship is you hit the nail on the head to become an extension of their staff and really partner with them and replicate the experience that they're used to having right now.
Katherine Lucas: Dan, okay, one more for you. I'm going to stay with you for another second. Is this a binary decision? Is this all or nothing?
Dan Morgan: I would say unequivocally no. We pride ourselves in our ability to be flexible and offer clients tailored solutions depending on their needs and pain points. So it's certainly not an all or nothing solution. We can work with our clients to essentially develop a customized plan to meet their needs.
Katherine Lucas: That's great. So I want to touch on a bit of a tangential topic. And Tony, I'm coming to you on this one. State Street's always been a technology company, right? But in the past year, we've really taken the bold decision to describe ourselves as a technology led organization. So talk to me a little bit about all of the investments that we are making to really deliver a market leading service here.
Tony Bisegna: Sure, to Dan's prior point to and the part of the discussion we're talking about, it's not about costs so much. It's costs, but it's also about the efficiency of the execution. And I think that really fits in really well to who we are, the technology platform, the alpha platform, how this fits in nicely into the front end of it, and to really make substantial progress here and drive this forward. We've recently signed a purchase agreement with CF Global and it's a smaller outside it's outsourced trading firm that. Realizes in probably middle to small managers it has a global footprint. So it's got a presence both in London and also in continental Europe as well as APAC. So it's a really nice fit for us. It will get us turn key into continental Europe very fast and into London and will augment what we're doing in the States as well as APAC. So I think that's a really significant piece of investment that we have. We're hopeful we'll close by year end. At that point in time. We really think we can amp up the whole business and really grow it fast. And this particular business right now, we've got pretty good details from some outside consultants that it's growing at a at a rate of about 20, 25% a year right now. So I think it's a really nice business for us. It fits in nicely. Capital light business really fits into our strategy, fits in with the broader bank strategy with alpha.
Dan Morgan: And I would add from a resources perspective, you know, post closing of the merger, we will have trading desks in Boston, New York and Toronto, in the Americas, London, in Lisbon, Portugal, in the in the EMEA region, and Hong Kong and Sydney, Australia. So seven different locations servicing equities, fixed income, exchange traded derivatives and foreign exchange, which is a pretty powerful resource to devote.
Katherine Lucas: Very powerful and very exciting. I want to thank Tony and Dan for joining me today and chatting about how State Street is really using our scale expertise and technology to support our clients entire trade lifecycle. Thank you both.
Dan Morgan: Thank you, Katherine.
