Wednesday, March 19, 2008

State Street's Clients Catch Wise

State Street Corp. Is Sued Over Pension Fund Losses, By VIKAS BAJAJ, New York Times, Published: January 4, 2008

The State Street Corporation, which manages $2 trillion for pension funds and other institutions, ousted a senior executive on Thursday and said it would set aside $618 million to cover legal claims stemming from investments tied to mortgage securities.

State Street made the announcement after five clients sued it, claiming they had lost tens of millions of dollars in State Street funds that they were told would be largely invested in risk-free debt like Treasuries. One fund lost 28 percent of its value during the credit troubles in the summer after placing big bets on mortgage-related securities, according to the lawsuits. ...

Even the hometown Massachusetts officials have figured out what State Street is really all about:

Massachusetts keeps discipline in asset allocation, Cardiff Garcia, Financial News, 18 Mar 2008

The Massachusetts Pension Reserve Investment Management Board, better known as PRIM, looks after pensions for public sector workers, including teachers.

The $52bn (€34bn) pension scheme, based in Boston, home to the US asset management industry, has terminated contracts with five asset managers since October ...

PRIM executive director Michael Travaglini said: “We adhere to a long-term policy, and if an asset class is outperforming and grows too much bigger than its target allocation, we’ll scale it back.” ...

PRIM is estimated to be the 22nd-largest US public pension scheme, and the 29th overall when including corporate schemes.

As executive director, Travaglini does not sit on PRIM’s nine-member board. He leads a staff of 24 that makes recommendations to the board on issues such as asset allocation and the hiring and firing of fund managers. ...

The scheme engages in a due diligence process that requires interviewing fund managers as well as underlying analysis. ...

Recent manager terminations were triggered by substandard performance and changes in personnel. Travaglini said each asset class was distinct and that the scheme has fired managers from one asset class while continuing to use them for another.

The scheme is looking to award an international equities contract worth $1.5bn, following PRIM’s termination of contracts with State Street Global Advisors and Boston Company Asset Management.

Additional information pertaining to clients and client lawsuits may be found at sttClients and sttLitigants, to the right.

No comments: