Anna Paglia joined State Street Global Advisors almost 18 months ago as executive vice president and chief business officer. VettaFi caught up with her at the Exchange conference in late March after her panel to ask her about SSGA’s activities in the space, including the firm’s recently launched SPDR SSGA Apollo IG Public & Private Credit ETF (PRIV), and where she sees innovation in the ETF space.
Innovation Drives SSGA's Launches
Where is State Street Global Advisors focused in the ETF space now? How is it looking to the future?
We are looking at the next wave of innovation. Product saturation is real, but I don’t think we are at the point where the market cannot absorb new products. As far as we are concerned, we don’t think we need to have a product for every season or a product for every Morningstar category.
We want to be very deliberate and very selective with the segments of the market where we want to complete. When we identify a segment of the market, we always ask ourselves, is this something that we want to bring to markets in a passive wrapper? Do we think that active management would bring some value to shareholders? If this is the case, do we have the internal capabilities to do that or do we want to partner with somebody else?
Best-in-Class Partners Are Key
Please tell me about how you approach that.
One thing that really drew me to SSGA — which is really unique to the firm — is this is a playbook about partnerships. Right now, it’s materializing with Bridgewater, Apollo and Galaxy, but it’s nothing new to SSGA. If you look at all the other active ETFs launched in the last decade or one and a half decades, you will see names like Nuveen, Loomis and BlackStone. The idea of partnerships has always been part of the fabric of SSGA.
We know what we are really good at, and we don’t need to be good at everything. Whoever tells you they can do everything that they want — that’s going to be the fast route to mediocrity. Whenever we identify a segment of the market where we have a high conviction, the next step is going to be finding who is going to help us produce that best in class of product.
The partnership with Brigewater [with the SPDR Bridgewater All Weather ETF (ALLW)] is good example. Risk parity is not new. Risk parity is not exotic or fancy. Our portfolio management team could have delivered a risk party strategy. But we said, why not do it with who invented it? There is a reason why Bridgewater has been a manager of that strategy for 30 years. They have been refining it for 30 years. They are the best in class at risk parity. Why would we want to launch something that in the end might be mediocre? When we have the opportunity, we partner with the best-in-class, iconic brand. That’s what drives our product philosophy.
Step Away From Your Comfort Zones
During your panel at Exchange, you spoke about diversifying away from what makes you comfortable. Does that mean investors must educate themselves more about things like alternative strategies and commodities, or can they rely on experts for that?
I think looking for the experts is always, always the best. I would never want to be a do-it-yourself investor when I have an opportunity to work with a financial advisor. When you make choices that don’t take you outside of your comfort level and you build a regular 60/40 portfolio, and even if doesn’t behave the way you expected it to behave, I don’t think anybody will criticize you. It is a strategy that has been proven sound for many, many years. But now there is really an opportunity to expand on that and step away from the comfort zone. That’s the beauty of it.
You don’t have to know all the answers yourself. You have financial advisors whose job is to understand the different class classes. So use the resources, use the tools. Use the experts, because in the end, they are the ones best suited to help you achieve your objectives.
Innovation in ETFs
What do you see as the most interesting trend in the ETF space in the last year? Where do you see innovation?
Private assets — everybody’s talking about private assets. It’s an asset class that has not been accessible to the masses, and it provides returns that are non-correlated to the traditional asset classes, equity and fixed income. And now we have an opportunity to really build that liquidity. Let’s make no mistake: This market is going to change dramatically in the next decade.
When I think about private markets today, it reminds me of the senior loans of 15 years ago when it seemed that it was impossible to have senior loans wrapped into an ETF. We’ve had investors really benefit from that type of exposure. But it didn’t happen because the ETF rapper is a magic box. It’s not like something is illiquid, and if you put it in the ETF wrapper it becomes liquid. The ETF wrapper helps you to work with the rest of the ecosystem.
The partnership with Apollo is giving us an extra-liquid tool to make sure that we run a portfolio that is always consistent with the ‘40 Act. It’s always liquid, but it includes securities that would not be eligible to be included in that portfolio but for the creation of a more liquid marketplace. What you are seeing today is just the beginning of an environment in which liquidity is going to be unlocked. The real liquidity is going to be unlocked with the multiple brokers that are coming into the picture, with the transparency, with the price discovery.
For more information, please visit VettaFi.com | ETF Trends.