BlackRock to pull bulk of U.S. ETF assets from State Street

In a move to reduce its reliance on State Street's custody services, BlackRock will shift 40% of the $2.2 trillion in assets to Citigroup, 30% to JPMorgan Chase and 15% to Bank of New York Mellon.

BlackRock Inc., the world’s largest issuer of exchange-traded funds, will move most of its U.S. ETF assets from State Street Corp. to reduce its reliance on the bank’s custody services.

BlackRock, with $2.2 trillion of U.S. ETF holdings at the end of the third quarter, will shift 40% to Citigroup Inc., 30% to JPMorgan Chase & Co. and 15% to Bank of New York Mellon Corp., the asset manager said Tuesday in a statement. The rest will stay with Boston-based State Street, one of BlackRock’s main rivals in the ETF business.

The transition will start in the second half of next year and take 18 months to complete, BlackRock said.

State Street, the third-largest issuer in the U.S., oversees the biggest ETF — the SPDR S&P 500 ETF Trust, with about $420 billion of assets. The firm had $43.3 trillion of assets under custody or administration at the end of September.

“These changes reinforce and diversify our operational foundation so that we can deliver more ETF exposures at greater scale and with the high standards that our clients expect,” Salim Ramji, BlackRock’s global head of iShares and index investing, said in the statement.

BlackRock, which signaled as early as May 2020 that it would be making the change, is still weighing a similar shift for its Ireland-based ETFs.

The move follows another large shift in 2017, when the New York-based firm yanked $1 trillion from State Street’s supervision and moved it to JPMorgan to cut costs.

“State Street will continue to play a critical role going forward as a long-term partner to iShares and the firm,” bank spokesman Ed Patterson said in an emailed statement. “Beyond ETFs, State Street continues to be a critical service provider to a diverse set of BlackRock funds.”