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Thursday, 18th April 2024
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Focused State Street could employ over 2,000 in Ireland - Ron Logue Back  
‘Our ‘secret weapon’ is our focus – we don’t have multiple lines of business to contend with and because of this we can continually invest in the business,’ is how State Street boss Ron Logue sees his company’s competitive advantage. As it aims to generate half its revenues outside the US, State Street’s Irish operations, State Street International and IFS, should continue to play a key role in the company’s plans, and Logue could see the business expanding to a point whereby State Street would employ as many as 2,000 workers in Ireland, he tells Fiona Reddan.
With roots that can be traced back to 1792 – the same year that the New York Stock Exchange was founded - State Street today is one of the world’s leading providers of investment servicing and investment management to institutional investors -- with offices in 25 countries, servicing customers in more than 100 markets. It has two Irish operations, State Street International and International Fund Services (IFS), which together employ over 1,000 people, and service funds valued at over $200 billion.

Ron Logue, chief executive officer (CEO) and chairman of State Street


When David A. Spina retired in June last year after suffering a heart attack, Ron Logue, who was named president in 2000 and chief operating officer (COO) in 2001, stepped into his shoes as chief executive officer (CEO) and chairman.

As president and chief operating officer, Logue, a Boston native, was responsible for overseeing State Street’s investment servicing, securities finance and investment research and trading activities, as well as information technology, and during his presidency, he led the integration of Deutsche Bank’s Global Securities Services business, which was acquired in January 2003, and included the Irish operation Deutsche International.

The transition to CEO and chairman has worked well says Logue. ‘Because I was president and COO prior to assuming the new role, for me, the transition has been extremely smooth. Essentially, our strategy at State Street has remained the same regardless of who has been CEO. In terms of my priorities – there are a number of them, which I have publicly stated. To summarise, the biggest one is to make us truly global.
There are many ways to do that. We have set a goal of 50 percent of our revenue to come from outside the U.S., but it’s also a cultural issue. Second, I want to deliver consistent earnings to the street and third, I want customers to know that by coming to State Street they are buying a value that they can’t buy anywhere else.
Lastly, I want this company to be a good place for people to work. If we can do these four things, we will be able to achieve very worthy objectives’.

Spina’s reign at State Street coincided with a particularly tough time for the mutual fund industry, as global equity markets received a battering, and investigations into market timing and trading abuses commenced.
Logue says that the mutual fund industry has entered a new world of regulation and heightened investor scrutiny, and, ‘the industry’s growth will depend on its ability to restore trust, create new products, cut costs and improve returns while operating with new and in some cases untested regulations’.

State Street in Ireland
State Street has been in Ireland since the mid-1990s and together with IFS we now employ more than 1,100 in two locations – Dublin and Kilkenny. While the acquisition of Deutsche International was behind much of that increase, ‘Ireland has become and will continue to be a major market for servicing offshore funds and hedge funds, and we see that business growing. Within five years, I could see us employing as many as 2,000 workers here,’ says Logue.

Market outlook
The ability of the industry to absorb increased regulation will affect growth in the US and Europe in the short-term, says Logue, adding, ‘how well the smaller fund companies can take on the cost of additional regulation remains to be seen’. ‘The demand for more transparency has brought about a significant shift in the way financial services firms and all public companies are doing business today and compliance is bigger and costlier than ever. I think balance is extremely important here and we have to be careful that over-regulation doesn’t become harmful. It’s very difficult, after all, to legislate for honesty,’ says Logue.

In the long-term, he believes that aging populations will continue to turn to mutual funds as a savings and investment vehicle, so more money will continue to flow into funds over the long term. But in order to maintain profitability and concentrate on growth, fund firms are going to have to streamline their operations.

‘We believe there’s more room for firms to outsource not only just their back-office, but their middle-office operations to companies like State Street. Growth for the long-term also depends upon the new products, and how much mutual fund firms want to invest in and offer alternative investments,’ he says.

On the product side of things, Logue believes that there are some interesting new investment products that are taking hold of the market right now. ‘Some, like exchange-traded funds, aren’t so new, but they are breaking into new territory by drawing more retail investors. ETFs are being used to attract new capital in Asian markets such as Hong Kong and Taiwan, and I believe that kind of innovation will continue. At the same time, institutional investors are demanding more fact-based research upon which to base their decisions. Firms that offer sophisticated, real-time data will benefit from this heightened demand. And in the mutual fund industry, particularly in the U.S. there’s a lot of innovation around meeting the new wave of regulatory requirements, with new products and services offered to new chief compliance officers,’ he says.

Closer to home, new investment products for multinational pension plans are drawing attention as well, says Logue, with pension pooling products, such as the Common Contractual Fund, attracting new investors, and may make Ireland a jurisdiction of choice for these types of products.

Alternative investments
Hedge funds have and will continue to play a significant role in State Street’s growth, and the company offers a complete set of servicing solutions including record keeping, fund accounting, valuation, risk management and regulatory reporting. In 2002, State Street acquired hedge fund specialist IFS, and since that acquisition, the company has more than tripled the hedge fund assets serviced from $35 billion and 350 funds, to $120 billion and 470 funds at the end of 2004.

There are no plans to integrate IFS into the State Street brand, and Logue says that through the IFS brand, State Street will continue to offer a full array of services to hedge funds. ‘What’s more, State Street can also offer funds and fund of funds additional services such as innovative alternative investing strategies, research and foreign exchange trading,’ he adds.

Future plans for growth
One of State’s Street’s goals is to generate half of its revenue from outside the US. In order to achieve this, Logue says, ‘we have to continue to maintain our focus on customer service. We have to be good listeners for our customers, be faster in developing products, and we will continue to sell on value, not on price. From a financial standpoint, we are also adapting to what I think is will be a slow-growth environment for the foreseeable future’.

Further growth at State Street will be driven both organically and through acquisitions.’If there are acquisitions out there that can enhance our capabilities or our market share – much like our acquisition of Deutsche Bank’s global securities services business – we’ll do them. But there aren’t a lot of deals like that out there.
Buying more of the same won’t do it. There’s a lot to be said for organic growth as well. Our focus on the total needs of our customers is what allows us to develop long-term relationships that create recurring revenue. For example, our top 100 customers have been with us for an average of 12 years. For our top 25 customers it’s longer at 19 years. We are selling each of them an average of 12.3 products. It’s our ability to retain those customers and sell them even more value-added products that creates a distinct differentiator for us,’ he says.

Like his predecessors, Logue is committed to keeping State Street independent saying, ‘although we will always act in the best interests of our shareholders, I’m committed to keeping State Street independent. Our independence is what gives us our focus, which is the key to our success. For us, focus doesn’t mean our business models are narrow or inflexible – or that we’re limited in terms of maneuverability and options. Our focus means having the ability to act quickly to make the right investments; it means making the right business decisions needed to grow globally and it means providing more value to our shareholders and our customers. Because of our focus, we can allocate our resources and manage our balance sheet without the distraction of multiple lines of business. My opinion is that if a large universal bank were to acquire us we would immediately become a depreciating asset as they would not be able to maintain the level of focus required to achieve success in this business’.

It has been said that when Logue joined State Street from the Bank of New England in 1990, to run its US mutual-fund servicing operations, he was pinpointed as a potential leader for the company. Logue is known for his quick decision making skills, and he would advise budding executives to do similar. ‘I have been given a lot of advice in my career, but one of the best pieces I have been given was to try to simplify issues by getting to the central issues quickly and acting decisively. Why? - because speed and decisiveness are terribly lacking in the business world and those that demonstrate these traits stand out,’ he says. He would also advise the following: ‘Know how to manage risk well and have a keen sense of the regulatory and compliance environment that is a cornerstone of today’s financial market. Think globally – there’s no question that the trend toward globalisation will continue and managers need to know how to adapt to and take advantage of this’.

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