State Street Chairman & CEO Ron O'Hanley Talks Deglobalization, Middle East Clients

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Off Finance Gathering and reout. This week, we're mostly upbeat on the prospects for the US economy, but are concerned about more sluggish.

Growth in Europe.

I'm really happy to say that Ron o'hanley, the State Street CEO, is joining me right now, and he says that the top challenge is the lack of global growth. Well, Ron is joining it now for an exclusive conversation.

I guess we're putting words into your mouth before we've even started the interview.

Let me just start off by asking you about how some of the conversations you've been having here are going. You are just telling me that this is probably your fifth or sixth time that you've been attending the FII.

Well, Jamana, first of all, thanks for having me, and I will say that the mood here is probably more optimistic than it's been in a while. If you think about this time last year, there was a great concern about a global recession, and I think the good news is that we've avoided that. There's certainly been uneven economic performance across countries, but we've avoided that. But as you

Where you see the major headwinds coming from, and then the global context.

So I think that there's a lot of headwinds to it. Firstly, we're still suffering from the residual inflation. Inflation has come down, but that's certainly getting in the way of some global growth. Secondly, there's some very important factors that will be potentially a

It's really interesting you.

Bring that up because I had an exclusive conversation yesterday with the Minister of Investment here in Claudy his agency Kadada Dada, and obviously the Kingdom has been very much focused on attracting FDI into the country and The question I post to him is whether this concept of geoeconomic fragmentation.

Increasing tree bears around the world will.

Act as an impediment for money coming into the country. And he said he thinks that some of those concerns are being overplayed because ultimately we have.

No choice but to be a globalized world.

Supply chains are extremely globalized and it's going to be difficult for that to change in reality.

And I would agree with Ellie's comments. It's I'm not suggesting that we're going to go back to something pre nineteen seventy, but the point being is that it's not as an to grade it as it was, and we have to make some trade offs. Now, what's going on here in Saudi is if you think about where Saudi has come from, it was largely an exporter of capital. What you're seeing now is there's enormous, enormously interesting investment

Yeah. Well, let me talk specifically about the State Street.

Now.

Earlier this year, State Street reopened.

It's the buy office, and you know, tons to consolidate your asset management service as the ones that you provide in the region is a buy and riat offices as a result, what was behind them?

Yeah, So.

We have a lot of people that live in Dubai. They were working out of Abadhabi and Abadhabi is still very important to us and that is the regional headquarters for us in the in the UAE, but we took it vantage of the DIIFC. It's an attractive place for investment professionals and so where we've cited our investment business there in Dubai.

Yeah, and actually we spoke to as the CEA president at the time of the opening.

It was really good to speak to her. You provide custody.

Services with some of the biggest asset managers around the world. I just wonder how you're catering your offerings towards some of the Middle East clients that you.

Have around here. Are the requirements different?

So I don't think the requirements at at aggregate level are different, but certainly there's different requirements when it comes to data where data is, how data is being custoded. Secondly, there's an interest in being able to take a look at the data not just in terms of how do we perform in the past, but what does it mean in terms of how we're going to invest differently in

That's interesting.

So you're already using AI as a tool to increase productivity and enhance the services that you offer.

I think that I would say that like most were early in this, because there's a lot of precautions we need to take around data privacy, data integrity. But yes, AI is increasingly a tool that's augmenting what the investment professionals are doing and basically enabling them to get to a decision or a new investment idea, or evaluate a new investment idea much quicker than they could before.

When you think about the business as a whole, I think in the past we've spoken about wanting to increase your lending capabilities. Can you just talk us through where you see the biggest opportunities for growth there?

So, I mean we are largely a fee for service business. If you think about what we do, we manage money or we service those that are in the investment business, pension funds, sovereign love funds. But some of those activities actually require the extension of credit. Sometimes it's for intra day or overnight liquidity.

So all of.

Our credit activities for to support our clients in the businesses that we're in.

And does that change in a region where some of these middleased clients are actually flushed with liquidity and you're sitting on a lot of cash.

Yes and no, Because for any given transaction, they may be flushed with liquidity, but that liquidity isn't available to actually finance a particular transaction. So not really is what I would say. I think it's to be able to provide that liquidity for our clients is actually quite important.

Sure enough. Well, I've got to ask you. We've bought us elections coming up.

And I'm going to ask you for your prognosis on who you think is going to come on on top. But from a market's perspective, volatility has started to creep up, and this is expected to be quite a volatile event irrespective of who wins. How do you position your systems for that?

So for us, we spend a lot of time answering questions of our clients or advising clients on how they position their own portfolios.

Yeah.

From a technology perspective, we certainly have focused on our systems and their ability to be stable in something like this. But I think the most important thing about this election is that there be certainty relatively quickly in terms of the outcome, which you don't want to have is an uncertain outcome for an extended period of time, exactly.

Work and test the results. For example, earlier this summer.

There were a couple of sort of freak episodes in markets and markets trading beginning of August, beginning of September.

You sold those big down days.

In the NICK that had knock on effects on global markets.

How again, are your systems coping.

These increasing varshop events that seem to be happening not just more often, but when they do happen with increasing lot of intensity.

Yeah. I think the most important thing from a technological perspective is being able to evaluate what is it that's happening, why it's happening, and then to very quickly be able to go to clients and say this is what we're observing. Oftentimes it's lack of liquidity in a particular segment of the marketplace. Yeah, and again it's hard to believe that when you think about how liquid some of these markets are.

Yeah. Yeah.

And where are you seeing a pickup and trading volumes right now? Which which geographic areas would you say has been the biggest growth?

Well right now with the approach of the election, obviously you're seeing a lot in the US and a lot of positioning around that, some positioning around equities, some positioning around treasuries. But in terms of trading volumes overall in the aggregate, I mean, financial economies follow economies, and as real economies grow, the financial economy tends to grow.

At a multiple of that.

And that's what we've seen in the development of all economies over the past thirty forty years. And so again, you think about a region like this with a very significant outsized growth relative to the rest of the world, you're seeing a growth in the financial economy and a growth in volumes right here in Saudi When you think about the Saudiast stock exchange and the amount of volume that's on that in a very short period of time.

I just want to bring it back to the interest rate environments. And of course the Fed have started to ease, they cut interest rates by fifty basis point, but interstrates is still pretty high. And you've got this strength scenario where it seems that the investors are pile into stock markets as stock markets are doing very well, but at the same time our sitting on a lot of cash too. Is that a phenomenon that you see as well, or investors sitting on more or less cash than usual.

So investors are sitting on a lot of cash, and what they wanted to see was what was going to happen with interest rates and the intersection of interest rates in the economy. And I think that the central banks, led by the Federal Reserves, have done a really good job in terms of engineering the so called soft landing. And so there is that cash on the sidelines. It's down a little bit, but your point's well taken that there's stile a lot of cash, which we see is

Yeah, well, Ron, we're going to leave it there.

It's been really fantastic helping to you. Thank you so much for taking the time to speak of us. That was Ron o'hanley's State Street CEO joining us here at FII