It’s dusk on a blue-skyed November’s day in New York and in just a couple of hours Lou Maiuri is set to take to the podium to deliver his acceptance speech upon receiving the annual GC Legend award.
We’re backstage at Chelsea Piers discussing his career as the sun sets over the Hudson and the once programmer-turned-entrepreneur-turned-dealmaker-turned-trading head who became president of a 50,000-strong organisation, lets me in on a segment of his speech.
“I have this thing, and I’ll talk about it tonight – it’s called the lone nut!” he says with a grin. “It’s a great TED Talk called How to start a movement, it’s only three minutes long and if you’ve never seen it, you should go watch it.”
Following the instructions of our soon-to-be newest Hall of Fame entrant and keen to gain more insight on his leadership philosophy I load up the video, and unexpectedly see it is based around a shirtless guy dancing like, well, a lone nut. He’s atop a hill on what seems to be a normal summer’s day. However, suddenly another dancer joins him from out of the blue (pointed out as his first follower), then a second, then another, followed by an entire crowd. “Now we’ve got a movement,” the TED Talk speaker Derek Sivers says in the video.
The speech – I realise – is a perfect analogy for one of Maiuri’s biggest and boldest career moves – State Street’s acquisition of Charles River Development (CRD) and the subsequent introduction of the front-to-back platform Alpha.
At one point a controversial play, the acquisition left the future of Maiuri and State Street hanging in the balance, but it ended up sparking a movement, before growing into the perfect achievement for Maiuri to sign off his State Street tenure with.
“If you have a concept – like State Street Alpha – and you don’t find the first follower you’re nothing but a lone nut! And there was a moment with the CRD acquisition where I wondered ‘is this going to happen fast enough?’” he says with an element of humour in the jeopardy, knowing the story turned out just fine.
“[At the time of the announcement] the stock was close to $100 a share. One month later it was $70.00. The industry was really sceptical, saying ‘You paid $2.6 billion for a trading system. State Street has lost their mind, what are they doing?’’
“I tell everybody I never doubted the idea – but there was really a bunch of people and clients that were the first followers that turned this lone nut into a leader. For me, I get great joy out of that every day.”
Just a month before our chat, Maiuri had announced he was leaving State Street after a decade with the asset servicing giant. This became the perfect time to delve into his past and look back to where it all began.
Eagle-eyed
A programmer coming out of college in the late ’80s, Maiuri’s career actually began at State Street in the early ’90s as vice president of technology, before he went on to co-found Eagle Investment Systems. He spent over a decade building up the investment management software solutions business before it was acquired by Mellon in September 2001, just five days before 9/11.
“It was an interesting transition, and I was in my 30s, so I wouldn’t say I was fully mature at that point, but Jim [Palermo] had the vision to buy Eagle and to help Mellon at that time with the infrastructure that they didn’t have to compete with the other trust banks,” he explains.
“The deal was an all-cash deal, and there was no earn out. Five days later the world changed.”
Despite not having an earn-out clause, Maiuri highlighted how he wanted to stay on with Mellon and help Palermo see his vision through because, as he puts it, “he changed our lives”.
This self-proclaimed “scrappy software company” was then integrated with Mellon at the time. Maiuri noted that there was a slight culture clash, but over the years the two parts of the business gelled together and became a strong franchise. He explained how he learnt the importance of each side of the business retaining its unique cultures. One innovative, scrappy and competitive, while the other is designed to run trillions of dollars every day at high scale and high resiliency.
Maiuri stayed with BNY Mellon until October 2013, where his last role was executive vice president and deputy chief executive officer of asset servicing.
Back to State Street
Maiuri’s second spell at State Street began in November 2013, when he initially took up the role of head of securities finance, before making the less familiar switch to global markets, where he operated for just shy of four years.
It was during this time that he put his experience of the Eagle/Mellon sale and integration into influence State Street’s landmark acquisition of CRD.
“Between 2016-17 there were three or four factors coming into the fray,” he explains. “Firstly, our customers were under a lot of pressure. We saw this whole transition from active to passive, and the active managers needed to transform, i.e. cut costs and find scale. Secondly, we saw fintechs try to come into our value proposition, everywhere from the trading businesses, transition management or securities finance.
“Of course, all of those are adjacencies to the custody businesses, but I said to folks that, quite honestly, a lot of the core businesses that we had were becoming mature or commoditised – custody, clearly and accounting for example. So, what was our differentiator?
“Well, we were the largest middle-office provider then and I still think we are today. The thought was to build the full platform so that asset managers could come on and do portfolio construction, trading, compliance, order management, record keeping, IBOR, ABOR, all the way straight through. It was an idea, it was a concept and we convinced ourselves that’s given the market dynamics, that’s what we needed.”
The was very much the start of the front-to-back era, a movement, if you will. Alongside his team, Maiuri spoke with the big players in the front-office space: IHS Markit, Bloomberg, BlackRock, but the issue was that State Street was looking for a differentiator, and these firms would not be exclusive to work with. While State Street would go onto plug in some of these systems in the years to come, these vendors also teamed up with its biggest rivals.
So Maiuri picked up the phone to Peter Lambertus, the CEO of Charles River. The problem was, there was no answer.
“The real truth here is I called on Peter Lambertus for six months and he never returned my call!” he explains. “I kept on trying and trying, and I would call people that worked for him and they’d said ‘yeah he’s going to call you back!’. And then one day I was on the trading floor one day the call came in and my assistant said there’s a ‘Peter Lambertus on the….’ and I rushed to the phone!
“Everybody under the sun, every private equity firm today that I meet says ‘how did you get him on the phone! We all have been trying’ and maybe it was my timing, maybe it was my charm.”
Joining the dots, it’s safe to assume Maiuri received the return call because of Lambertus’ familiarity with his Eagle story and background. Lambertus was also said to like Jay Hooley, the State Street chief executive at the time.
“First of all, I said to him I was very respectful of what he’s created. He was 73-year-old founder, CEO, that had built this great company. It was then three months of conversations.
“He was an interesting individual. Every Wednesday and sometimes Saturdays, we would talk and a lot of times I would repeat the same industrial logic, show how we were going to beat folks and grow, and that went on for three months. Just think: nine months had passed at this point.”
The Alpha-bet
From the day Lambertus said ‘okay, let’s do this’ six months of negotiation then led to the announcement on 20 July 2018 that State Street was set to buy CRD for $2.6 billion as part of its strategy to have a front-to-back client servicing platform, which at the time it dubbed ‘the first ever’ in what would one day be rolled into Alpha.
As a securities services title, Global Custodian was intrigued by the acquisition from an ambition point of view, the boldness of the strategy and how it would shake up the industry. For the rest of the media however, it was all about the price of the deal.
“The industry was sort of really sceptical,” he says. “But the strategy was there and we felt this is the prize of the marketplace, and once we got into the data room, we realised a lot of CRD customers are our customers, some of the largest in the world.
“I had to get on the road with investors and I would sit with them and explain how we’re trying to build a platform and this is what platform companies look like.”
For a while, State Street was the ‘lone nut’, dancing on the hill alone. But soon, the followers came. Not only clients, but competitors too. In the years following the deal, its asset servicing rivals – Citi, JP Morgan, Northern Trust, BNY Mellon and BNP Paribas Securities Services – each signed their own variation of an alliance with BlackRock’s Aladdin business in response to the trend, while some also opted for Amundi, SimCorp and Bloomberg.
In October 2020, Global Custodian ran an article titled: The Alpha bet: How State Street is silencing the doubters of its Charles River acquisition. Despite the scepticism at the outset of the deal, suddenly some of the world’s largest asset managers were opting for State Street Alpha, and while the numbers were modest by some metrics, the sheer lift involved in onboarding meant that the progress was impressive.
“If I were them, I would have had the same concerns, it was an extremely dilutive deal to shareholders,” said State Street chief executive Ron O’Hanley to me at the time, referring to the critics who questioned the custodian’s purchase of Charles River in 2018. “But what is playing out, well, it’s going just as we all internally believed it would.”
The article in October 2020 was written from the viewpoint that a third of State Street’s new mandates were stemming from Alpha. That number is now up to 17, along with Alpha being extended to the entire ETF lifecycle. Just days after my chat with Maiuri, State Street announced it had successfully onboarded BMO Global Asset Management.
As for CRD, what was a $330 million software company is now going be close to $700 million in 2024, Maiuri noted.
“It’s exceeded my expectations – I didn’t think we’d have that many live,” he added, referring to the 17 onboarded clients at the time of writing. “The speed of which it took off was pretty fast. Right away there were a few clients who just said ‘I get it’. Invesco was one of the first clients that, before we even announced that deal, called us up and said, ‘this is the smartest thing I’ve ever saw’. But I had to say ‘we can’t talk about it’.
“I sometimes get way too much credit. I might have been the birth of the idea and got the piece of it going, but there’s a whole army of people like John Plansky, Dave Eshenower that just make it happen every day.”
Beyond the deals
It’s easy to get carried away telling the stories of the two deals when delivering the highlights of Maiuri’s career, but these were just one of five acquisitions and integrations which also included BestX and Mercatus.
In addition, there was the attempted takeover of Brown Brothers Harriman’s Investor Services business which fell at the final hurdle due to regulatory intervention. While that was bitterly disappointing for all involved, Maiuri – like other State Street executives we’ve spoken to, still sees the logic in the marriage.
“It was a similar process to the one with CRD because we had to convince a few of the partners of this industrial logic of us conquering the world,” Maiuri explains. “They have some interesting assets and we have interesting assets that would have been such a beautiful integration.
“I still have friends there and if we could do it tomorrow, then we would. The quality of the people, they were great. So that would have been another great moment for us and that was one that I led too. But we tried.”
The next chapter
When Global Custodian handed Maiuri his award in New York, we made sure his achievements running adjacent to his role were mentioned. Among them was his work around advocating for gender and racial equality, actively working with senior leadership to drive positive change and deliver meaningful and measurable results.
Maiuri has served as executive sponsor for State Street’s Professional Women’s Network for five years, and has been recognised for four consecutive years (2019-2022) by Yahoo Finance’s HERoes, an annual global ranking of business leaders who are driving change to increase gender diversity in the workplace. In addition, he has led many of State Street’s Diversity, Equity and Inclusion initiatives and is active in State Street’s 10 Actions Against Racism and Inequality – serving as the executive sponsor for Action 1 focused on increasing Black and Latinx representation.
When I asked ‘what has made a good day at work for you over the years?’ he simply said: “the people”, showing how much he has valued his team, the ability to innovate and lead, and enjoyed the initiatives designed to improve the working landscape through equality. Despite founding Eagle and selling it to a major bank, and the subsequent deals he’s been involved in at State Street, Maiuri remains humble.
While many had tipped him as the heir to the State Street CEO role, he announced late last year he would be leaving the organisation. Despite the word ‘retirement’ being suggested, it appears Maiuri will be back in action in the very near future.
“I think about my next endeavour and I want to lead a company. I want to go back to being that person that’s setting the strategy and setting the culture.
“You won’t hear anything for a while. I’m still working and I’m transitioning everything in a good quality way, meeting with clients. The worst thing you could do as a leader is you hand it off and it all falls apart. That is not going to happen. And the great thing about Ron – we’re very close – is he understood. He said, ‘I get it’.
“Next, for me, it’ll be the fusion of using my business acumen, my leadership skills, but putting my tech and possibly services together in some operating model. I think it could wind up being in financial services, that would be the natural place because it’s what I know. But we’ll see.
“I’m excited about the future.”
When Maiuri did take to the stage at our awards to deliver his speech, there was laughter, there was admiration, and there was rapturous applause. Certainly not a lone nut, but an individual with followers, admirers and a lot of friends in the industry, who managed to trailblaze his way to the top and enjoy his time there.