State Street Corporation’s (STT) total assets under management (or AUM) are expected to be negatively impacted in 1Q18 by the performance of the equity markets. The company ended fiscal 2017 with total AUM of ~$2.8 trillion, with an equity component of ~$1.7 trillion.
In the equity component, net long-term institutional outflows were $74.0 billion, comprising long-term institutional inflows and outflows of $270.0 billion and $344.0 billion, respectively.
Of the total AUM, State Street’s total alternative investments stood at $146.0 billion in fiscal 2017. In this component, net long-term institutional outflows totaled $21.0 billion, comprising long-term institutional inflows and outflows of $20.0 billion and $41.0 billion, respectively.
State Street’s management fees primarily depend on the total AUM number. An increase in total AUM would, in turn, lead to a rise in the management fees. The weaker performance of the equity markets would negatively impact the management fees.
Fixed-income asset class
Of State Street’s total AUM of ~$2.8 trillion in 2017, the fixed income and cash components totaled $414.0 billion and $330.0 billion, respectively. In the fixed-income component, the long-term institutional inflows stood at $94.0 billion and outflows stood at $92.0 billion. So, net long-term institutional inflows stood at $2.0 billion.
In 2017, overall market appreciation resulted in an increase of $15.0 billion in the contribution of fixed income component.
While State Street’s price-to-cash-flow ratio is ~5.4x on an LTM basis, peers Franklin Resources (BEN), Northern Trust Corporation (NTRS), and BlackRock (BLK) have price-to-cash-flow ratios of ~18.6x, ~13.8x, and 22.6x, respectively, on an LTM basis.
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