State Street is a global powerhouse in FX and has positioned its research as a key differentiator in its market-leading sales offering. Over the review period, the bank introduced new measures for monitoring political risk and improved its capturing of changes in investor and central bank behaviour.
A key development for State Street’s research product suite was the broadening of its coverage to better understand geopolitical risk. To that end, the bank notably partnered with Dan Drezner, a professor of international politics at Tufts University, and GeoQuant, a data technology company that uses a combination of fundamental and media data to score political risk. This led to the creating of a measure of geopolitical risk for 34 exchange rates, which State Street publishes daily on its research website.
The second significant initiative brought by State Street was the launch of its FX Signal Studio alert publication in June 2023. The publication flags important changes in the FX behaviours of large institutional investors by leveraging the back-testing tool and identifies high conviction ideas based on prior patterns of investor behaviour. During the review period, State Street published 16 alerts which had a success rate of 69%.
The launch of the Street Signals podcast was a further differentiator, combining the bank’s academic work, indicators and market strategy capture to inform on current market themes.
State Street’s client base includes some 80% of the world’s largest asset managers, along with global sovereign wealth, pension funds and central banks, who consume its research. Traffic to its research website grew by over 7%, from 5,700 clients and over 1,200 institutions. All together, the bank conducted over 1,000 client meetings, webinars and conferences in addition to its ‘summer sessions’ training programme that attracted more than 4,000 participants.
William Kinlaw, head of research, says: “Through our new partnership with Tufts University Professor Dan Drezner we are offering our clients a lens into how geopolitical outcomes have the potential to move markets. Likewise, through our partnership with GeoQuant (a Fitch company), we co-developed measures of geopolitical risk for over 30 exchange rates, offering clients an independent and quantifiable assessment of geopolitical risk to better inform their investment decisions."
“In an FX market dominated by position unwinds and politics our existing and new measures of FX risk really came into their own in the review period,” says Michael Metcalfe, State Street’s head of macro strategy.
“We launched the Street Signals podcast to help synthesize how our academic work, indicators and market strategy capture and inform on current market themes. Now, the introduction of Street Signals has helped to deliver insights on the latest and most important market developments in a more digestible and accessible way than ever before.
“We’re committed to exploring new ways to socialize our research across various media. Our FX Signal Studio is designed to identify high conviction ideas based on prior patterns of investor behaviour, and alert clients of trends based on empirically captured data.”