State Street Loses Market Share as BlackRock Extends Lead

It’s a tale of two exchange-traded fund firms.

It’s the best of times for

BlackRock
Inc.,


BLK -0.40%

at least when it comes to ETFs. The world’s largest asset manager pulled $42.3 billion into its U.S. iShares ETFs in the second quarter. Compare that to

State Street
Corp.


STT 6.73%

, whose SPDR ETF lineup suffered a third consecutive quarter of outflows.

Both firms reported earnings Friday, and neither lives or dies by its ETF business. But it’s a confirmation of BlackRock’s dominance in one of the fastest-growing segments of the asset management industry, and a reminder of how State Street, the firm credited with launching the first ETF in 1993, squandered its lead.

State Street launched the first ETF 26 years ago and dominated the market for a decade. The original SPDR S&P 500 ETF Trust is still the largest in the industry with $283 billion in assets, and is one of the most-traded securities on the planet.

But State’s Street’s slice of U.S. ETF assets have fallen to an all-time low of just 16.2%—down from 49% 16 years ago, according to Morningstar.

BlackRock’s iShares, on the other hand, is now the world’s largest ETF business. Its ETFs have raised $150 billion in the past 12 months. There is $1.6 trillion in iShares U.S. ETFs, more than double State Street’s ETF assets.

But in the hypercompetitive industry of asset management, an influx of assets doesn’t necessarily translate to higher profits. BlackRock reported earnings Friday of $6.41 a share, missing analyst estimates. Its stock fell slightly $474.88 a share.

State Street, whose bigger business is in custody banking, beat estimates. The firm reported net income of $1.42 a share while analysts polled by FactSet had predicted earnings of $1.36 a share.

State Street rose 5% Friday to $59.12 a share, making it the best performing stock in the S&P 500.

Write to Asjylyn Loder at asjylyn.loder@wsj.com

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