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Dec. 8, 2021, 10:11 a.m. EST

BlackRock to pull $2 trillion in ETF assets from State Street

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By Dawn Lim and Justin Baer

BlackRock Inc. /zigman2/quotes/207946232/composite BLK +1.83%  is pulling some $2 trillion of assets out of State Street Corp.’s /zigman2/quotes/209758976/composite STT +2.65%   safekeeping, a move that will reduce the investing firm’s reliance on a small number of parties and lower the fees it pays for back-office work.

For more than a decade, State Street served as the sole custodian to BlackRock’s U.S. exchange-traded funds—low-cost investment vehicles that have exploded in popularity in recent years. State Street services all of the roughly $2.3 trillion across those BlackRock funds.

While custody work often involves staid tasks such as maintaining investment records and handling and valuing assets, it is crucial to the smooth functioning of Wall Street and its multitrillion-dollar ETF machine. Traders, pensions and central banks depend on ETFs to invest across stock and bond markets.

BlackRock, the world’s largest ETF manager, is now shifting some of the administrative and accounting tasks State Street had performed to Citigroup Inc. /zigman2/quotes/207741460/composite C +1.32% , JPMorgan Chase   & Co. /zigman2/quotes/205971034/composite JPM +0.48% and Bank of New York Mellon Corp /zigman2/quotes/218115597/composite BKEM +0.52% .

An expanded version of this story appears on WSJ.com.

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