State Street (NYSE:STT) is the world's third largest institutional investor and the world's second-biggest exchange traded funds ( ETF ) provider after BlackRock ( BLK ). But that is predominantly due to its strong position in the U.S. ETF market. While State Street, through its SPDR brand of ETFs, had over $210 billion (as of April 2011) worth of assets under management globally, it was dwarfed in the European ETF markets with only $1.2 billion worth of assets under management compared to BlackRock's $115.3 billion.
In a recent move to strengthen its presence in the European ETF market, State Street has added 8 new ETFs to its existing 13 in Europe, with more launches scheduled later this year. We value State Street with a $47.78 stock price estimate , in line with its current market price.
We've also previously discussed what makes the European ETF markets crucial for global asset managers in an article titled ' Vanguard Challenges BlackRock's ETF Dominance With European Push '.
Not Much Upside to State Street Stock
We estimate that ETFs make up less than 2.5% of State Street's stock value. State Street stands in the 20 th position with a 0.3% share of the European ETF market.
And how sensitive is State Street's stock to growth in ETF assets under management?
We currently estimate that State Street's ETF assets under management will grow at an annual rate of over 13%, breaching the $620 billion mark by the end of our forecast period. Even a 1% increase in this annual rate, coming from greater presence in Europe, would only spur 0.2% potential upside to our price estimate for State Street's stock.
Since State Street still has a small presence in the European ETF market, investors should take note of how well the recently launched ETFs are able to gain traction and scale up trading volumes in the near term.