state-street

Video: Herrmann Says U.S. Economy Vulnerable for 6 to 18 Months: Video

July 2, 2010

July 2 (Bloomberg) — John Herrmann, a senior strategist at State Street Global Markets, talks about the U.S. economy and labor market. Herrmann talks with Carol Massar and Matt Miller on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

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Scott Brown’s Sweetheart FinReg Deal Needs A Snappy Nickname

June 28, 2010

Over at the Wonk Room, Pat Garofalo takes a moment this morning to discuss the sweetheart deal that Senator Scott Brown (R-Mass.) carved out of the financial regulatory reform negotiations to benefit banks in his home state: As the conference committee reconciling the House and Senate versions of financial regulatory reform went through its marathon 20 hour negotiating session on Thursday night, an exception to the Volcker rule — which prevents banks from trading for their own benefit with federally insured dollars — was added at the behest of Sen. Scott Brown (R-MA). The exception, which was pushed by large Massachusetts-based financial firms State Street Corp. and Mass Mutual, allows banks to invest up to three percent of their capital in risky hedge funds and private equity firms and to continue managing those funds. These exemptions could undermine the effectiveness of the rule, as State Street is a great example of a financial firm that specialized in relatively benign financial practices, but then became systemically important by building up a huge amount of credit risk and engaging in risky trading. Ultimately, it needed to be rescued by federal intervention. Garofalo has more about how this “strikes at the very heart of the Volcker rule, so get thee hence to learn more. What I’d like to know is why we don’t yet have a snappy, headline-ready nickname for this little bit of chicanery, like “Cornhusker Kickback” or “Louisiana Purchase.” If you have any suggestions, feel free to leave it in the comments. RELATED: Scott Brown Receives Special Deal In Financial Reform Bill, But Still May Vote Against It [Wonk Room] [Would you like to follow me on Twitter ? Because why not? Also, please send tips to tv@huffingtonpost.com -- learn more about our media monitoring project here .]

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Video: Herrmann Says U.S. Economy in `Soft Patch’: Video

June 11, 2010

June 11 (Bloomberg) — John Herrmann, a senior strategist at State Street Global Markets, talks with Bloomberg’s Matt Miller about the outlook for the U.S. economy. Sales at U.S. retailers unexpectedly dropped in May for the first time in eight months, indicating the rebound in consumer spending is cooling as Americans boost savings. (Source: Bloomberg)

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Video: Herrmann Says U.S. Economy in `Soft Patch’: Video

June 11, 2010

June 11 (Bloomberg) — John Herrmann, a senior strategist at State Street Global Markets, talks with Bloomberg’s Matt Miller about the outlook for the U.S. economy. Sales at U.S. retailers unexpectedly dropped in May for the first time in eight months, indicating the rebound in consumer spending is cooling as Americans boost savings. (Source: Bloomberg)

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Former SAC Capital President Brian Cohn Said to Start Equities Hedge Fund

June 10, 2010

By Saijel Kishan June 10 (Bloomberg) — Brian Cohn , a former president of SAC Capital Advisors LLC, is planning to start his own hedge fund, according to two people with knowledge of the move. Archeroak Capital Management LP, based in Old Greenwich, Connecticut, is scheduled to begin trading equities by the end of the year, said one of the people, who asked not to be identified because the information is private. Cohn, 43, left SAC Capital at the start of 2008 after working with founder Steven Cohen , 53, for 11 years. Cohn, who didn’t trade at SAC Capital, had previously spent about four years working for International Fund Services, which provides operations and trading for asset managers and is now a unit of Boston-based State Street Corp. Joining Cohn are industry heads Jeff Messina , who previously worked at New York-based hedge fund Level Global Investors LP, and Christina Kim , who was at Andor Capital Management LLC, a Greenwich, Connecticut, hedge fund managed by Daniel Benton that closed in 2008. Messina will cover cyclical industries while Kim will oversee technology stocks, one of the people said. Hedge funds rebounded last year from their biggest loss on record in 2008, and are up about 1.5 percent this year. Last quarter, 254 funds started business compared with 230 in the fourth quarter of 2009, according to Hedge Fund Research Inc. in Chicago. Cohen started Stamford, Connecticut-based SAC Capital in 1992 and manages about $12 billion. To contact the reporter on this story: Saijel Kishan in New York at skishan@bloomberg.net

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Ex-SAC Capital President Cohn Is Said Ready to Open Hedge Fund This Year

June 10, 2010

By Saijel Kishan June 10 (Bloomberg) — Brian Cohn , a former president of SAC Capital Advisors LLC, is planning to start his own hedge fund, according to two people with knowledge of the move. Archeroak Capital Management LP, based in Old Greenwich, Connecticut, is scheduled to begin trading equities by the end of the year, said one of the people, who asked not to be identified because the information is private. Cohn, 43, left SAC Capital at the start of 2008 after working with founder Steven Cohen , 53, for 11 years. Cohn, who didn’t trade at SAC Capital, had previously spent about four years working for International Fund Services, which provides operations and trading for asset managers and is now a unit of Boston-based State Street Corp. Joining Cohn are industry heads Jeff Messina , who previously worked at New York-based hedge fund Level Global Investors LP, and Christina Kim , who was at Andor Capital Management LLC, a Greenwich, Connecticut, hedge fund managed by Daniel Benton that closed in 2008. Messina will cover cyclical industries while Kim will oversee technology stocks, one of the people said. Hedge funds rebounded last year from their biggest loss on record in 2008, and are up about 1.5 percent this year. Last quarter, 254 funds started business compared with 230 in the fourth quarter of 2009, according to Hedge Fund Research Inc. in Chicago. Cohen started Stamford, Connecticut-based SAC Capital in 1992 and manages about $12 billion. To contact the reporter on this story: Saijel Kishan in New York at skishan@bloomberg.net

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Video: Fan Sees Europe’s Debt Crisis Taking U.S. Focus Off Yuan

May 24, 2010

May 24 (Bloomberg) — Monica Fan, currency strategist at State Street Global Advisors, talks with Bloomberg’s Mark Barton about the outlook for a yuan revaluation and the prospect of the European Central Bank intervening to support the euro.

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Video: Herrmann Says `Shock’ from Greece Could Spread Globally: Video

May 7, 2010

May 7 (Bloomberg) — John Herrmann, a senior strategist at State Street Global Markets, talks with Bloomberg’s Matt Miller and Carol Massar about the impact of the Greek fiscal crisis on global financial markets. Herrmann also discusses the outlook for the U.S. economy and the European Central Bank’s response to European budget crises. (Source: Bloomberg)

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Video: Herrmann Sees U.S. Economy Continuing to `Grow Strongly’: Video

April 23, 2010

April 23 (Bloomberg) — John Herrmann, a senior strategist at State Street Global Markets, talks with Bloomberg’s Matt Miller and Carol Massar about U.S. new home sales in March and the outlook for the U.S. economy. Sales of new homes surged 27 percent in March and orders for most durable goods climbed, indicating the U.S. economy sped up heading into the second quarter. (Source: Bloomberg)

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Video: Herrmann Doubts Goldman Suit Will Spark Stock Sell Off: Video

April 16, 2010

April 16 (Bloomberg) — John Herrmann, a senior strategist at State Street Global Markets, talks with Bloomberg’s Carol Massar about the possible impact of the Securities and Exchange Commission’s suit against Goldman Sachs Inc. on U.S. stocks. Goldman Sachs was sued by U.S. regulators for fraud tied to collateralized debt obligations that contributed to the worst financial crisis since the Great Depression. (Source: Bloomberg)

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State Street Beats BlackRock to Manage $2.1 Billion in Massachusetts Funds

April 6, 2010

By Christopher Condon April 6 (Bloomberg) — State Street Corp. won two mandates to invest a total of $2.1 billion for Massachusetts’ public pension fund, beating BlackRock Inc. in each case. The state’s Pension Reserves Investment Management Board , which oversees retirement funds for public employees and teachers, awarded State Street’s asset-management unit $1.5 billion for non-U.S. investments and $600 million for emerging markets, according to an agenda published today. The board cited Boston-based State Street’s lower fees and “organizational stability” in making the selection. BlackRock’s bid included proposed fees nearly three times State Street’s, according to the pension board. It also said BlackRock “faces significant integration risk from its $13.5 billion acquisition of Barclays Global Investors in December 2009.” The deal made BlackRock the world’s largest asset manager, with $3.35 trillion in investments. State Street oversaw $1.91 trillion as of Dec. 31. Brian Beades , a spokesman for New York-based BlackRock, declined to comment. Both of the pension board’s mandates are for passive investments that track a market index. The larger mandate will increase the fund’s non-U.S. stock holdings overseen by State Street to $3.85 billion. The fund managed $42.2 billion as of Feb. 28. Bank of New York Mellon Corp. and Chicago’s Northern Trust Corp. were also finalists for the non-U.S. equity index mandate. Northern Trust was also a finalist to handle the emerging markets investment. The banks didn’t immediately return calls for comment. To contact the reporter on this story: Christopher Condon in Boston at ccondon4@bloomberg.net

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State Street to Pay $313 Million After SEC Sues Over Bond-Loss Disclosure

February 4, 2010

By Christopher Condon Feb. 4 (Bloomberg) — State Street Corp. , the world’s second-largest money manager for institutions, agreed to pay $313 million in penalties and restitution to settle allegations it misled investors about their exposure to mortgage-backed securities. State Street was also accused of selectively disclosing information to specific investors, the U.S. Securities and Exchange Commission said today in a statement. The SEC told State Street in June it would probably sue the firm for “violations of antifraud provisions of the federal securities laws” based on the agency’s investigation into disclosures and management of fixed-income investments through 2007. State Street had already been sued by investors claiming its bond funds took too much risk by investing in securities tied to home mortgages. The payment won’t exceed the amount remaining in a reserve the Boston-based company set aside starting in 2007 to cover litigation from the SEC and customers, according to information previously reported by the company. The company set aside about $875 million in two stages as of Nov. 6 and had paid out $522 million to clients who had sued. To contact the reporter on this story: Christopher Condon in Boston at ccondon4@bloomberg.net

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Reserve Primary Judge Orders Equal Distribution of Losses From 2008 Crash

November 25, 2009

By Christopher Condon Nov. 25 (Bloomberg) — Reserve Primary investors waiting for cash from the money-market mutual fund whose September 2008 crash helped freeze global credit markets must share equally in its losses, a federal judge said. U.S. District Judge Paul Gardephe in New York today agreed with the Securities and Exchange Commission and ordered a pro rata distribution of almost all the fund’s remaining assets. All shareholders can expect to recover at least 98.75 percent of money held in the fund when it closed on Sept. 16, 2008, according to data compiled by Bloomberg. The decision marks the first major step by a court to clean up the mess left for investors caught in the largest money-fund failure in the industry’s 40-year history. Reserve Primary, the oldest money-market fund, became only the second such fund to drop below its traditional $1 share price, or break the buck, after it lost $785 million on debt issued by Lehman Brothers Holdings Inc . The judge rejected claims for full recovery by investors, such as Deutsche Bank AG and online broker E*Trade Financial Corp ., that made withdrawal requests before the fund’s shares fell below $1. That benefited a smaller group of investors including Ameriprise Financial Inc . that were originally told they would shoulder the entire $785 million shortfall. The SEC is one of more than 30 regulators and investors that sued the fund and its managers. Litigation Expenses Gardephe ordered that $83.5 million be withheld to cover “reasonable litigation expenses” incurred by the fund, its managers and State Street Corp., the fund’s custody bank. That compares with the $3.5 billion set aside in February by Reserve Management Corp., the New York-based firm that ran Reserve Primary. The decision blocks all claims directly against the fund in order to allow for the distribution of cash. It doesn’t affect the status of claims against Reserve Management, or its managers and owners. The SEC has accused Reserve’s founder, Chief Executive Officer Bruce R. Bent , and his son, President Bruce Bent II , of fraud for allegedly misleading investors in an attempt to prevent withdrawals after Lehman filed for bankruptcy in the early hours of Sept. 15, 2008. Reserve Primary held about $62 billion in net assets when Lehman collapsed. Investors withdrew about $10.8 billion before State Street stopped wiring them cash at about noon on Sept. 15. Withdrawal requests continued and, over the next 28 hours, the fund issued receipts promising to pay another $28 billion at a full $1 a share. The fund’s share value dropped to 97 cents, and the fund said it would liquidate, at 4 p.m. on Sept. 16. Investor Arguments Deutsche Bank , which held $500 million in the fund, argued it was entitled to all its principal under rules set by the Investment Company Act of 1940. The SEC countered that Reserve Management’s share-price calculations were “fatally flawed” on the fund’s last two days of operation because managers had misinformed independent directors about the true state of the fund. The power to close a fund lies with its directors. Deutsche Bank stands to lose about $6.25 million, according to Bloomberg calculations based on Reserve Management estimates of assets in the fund. A separate group of investors holding $1 receipts argued in favor of the SEC’s pro rata distribution plan in order to speed the payout of the fund’s remaining money. ‘Only Viable Option’ The group, including China’s $297.5 billion sovereign wealth fund, Time Warner Inc . and International Business Machines Corp ., called the SEC’s plan “the only viable option to achieve a full distribution to the fund’s investors in the near future.” China Investment Corp ., based in Beijing, had the most at stake in the court’s decision. The judgment may leave it about $66 million short of the $5.34 billion it held in the fund, Bloomberg calculations show. Ameriprise is among the biggest winners. It will end up losing about $41.6 million, about $78.4 million less than if the $1 receipts had been honored, according to Bloomberg calculations. Ameriprise had about $3.2 billion invested in Reserve Primary on behalf of more than 325,000 customers, and $128 million of its own capital. The Lehman losses represented about 1.5 percent of the $51.2 billion in shareholder assets on Sept. 16, after the flurry of withdrawals. Returns from holdings have added about $235 million, while legal expenses and management fees amounted to $90 million, according to Reserve Management estimates. That leaves investors with about 98.75 percent of their principal. Next Battles That amount would increase if the fund can sell its Lehman debt for any amount. The SEC and others suing Reserve will now take closer aim at the Bents and other executives at Reserve Management. “The next level of claims, against the managers of the fund for their personal misconduct, is a fight for another day,” Robert Skinner , an attorney for Boston law firm Ropes & Gray LLP representing Ameriprise, said in an interview. Skinner said fraud claims “are still very much in play after the pro rata distribution of the funds.” Reserve Primary’s closure sparked a wider run among investors who withdrew $230 billion from money-market funds within three days, according to Crane Data LLC, a research firm in Westborough, Massachusetts. That caused the market for commercial paper, where money funds provide about 40 percent of demand, to seize up. This threatened the ability of thousands of companies, including Fairfield, Connecticut-based General Electric Co ., to roll over debt they use to fund short-term cash needs. The SEC has proposed changing rules that govern money market funds to make them more stable. To contact the reporter on this story: Christopher Condon in Boston at ccondon4@bloomberg.net

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Video: Cuggino Favors BHP Billiton, State Street, FedEx: Video

November 13, 2009

Nov. 13 (Bloomberg) — Michael Cuggino, who helps oversee more than $4 billion at Pacific Heights Asset Management LLC in San Francisco, talks with Bloomberg’s Matt Miller and Carol Massar about the U.S. economy and fund holdings. Cuggino says he sees growth opportunities for BHP Billiton Ltd., FedEx Corp. and State Street Corp. (Source: Bloomberg)

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Vanguard’s Low ETF Fees Help Late Arrival to the Market Increase Share

November 3, 2009

By Charles Stein Nov. 3 (Bloomberg) — Vanguard Group Inc. , the largest U.S. manager of stock and bond mutual funds, is gaining market share in exchange-traded funds, a business its founder John Bogle has criticized for encouraging speculation. Vanguard, the third-largest sponsor of ETFs, captured more than 30 percent of the money flowing into the business this year by charging an average fee of 15 cents for every $100 in assets, compared with 54 cents for the industry, according to Morningstar Inc . The Valley Forge, Pennsylvania-based firm’s ETF sales trailed only Barclays Global Investors, based on data through the third quarter. “If the price is low enough, investors will vote with their wallets,” Scott Burns , director of ETF analysis at Chicago-based Morningstar, said in a telephone interview. Vanguard started selling ETFs in 2001, later than its larger rivals. The firm is competing for customers who want to capture the returns of markets or industries, rather than individual stocks. ETFs caught on more than a decade ago with institutional investors such as hedge funds, and are gaining popularity with brokers and advisers who manage money for individuals. “Interest among those groups is phenomenal,” said Martha Papariello, principal with Vanguard Financial Advisor Services. Vanguard has $77 billion in ETFs, after inflows of $17.8 billion this year. The firm’s share of the market rose to 11 percent from 8.5 percent as of Dec. 31, according to Boston- based State Street Corp. , which sells the funds and tracks the business. Industry Growth IShares, owned by London-based Barclays Plc, is the market leader with $346 billion. It attracted $25 billion in 2009 Morningstar data show. State Street, second in ETF assets with $163 billion, had outflows of $25.8 billion. ETFs typically mimic indexes, while trading throughout the day like stocks. U.S. ETF assets increased 30 percent this year to $695 billion, according to State Street. Mutual-fund assets grew 13 percent to $10.8 trillion, according to the Investment Company Institute, a Washington-based trade group. State Street created the first fund in 1993. Barclays, which entered the business in 1996, agreed in June to sell the Barclays Global Investors unit to New York-based Blackrock Inc. for $14.2 billion. Vanguard got into the business in this decade as brokers moved away from a model in which they were paid commissions for selling products to one in which they charge a flat fee for managing money, said John Woerth , a Vanguard spokesman. There was no incentive under the old model for advisers to use Vanguard products “because we don’t pay for distribution,” he said. Vanguard Funds Vanguard is best known for its index mutual funds. Its first, the Vanguard 500 Index Fund , was started by Bogle in 1976. Bogle said that because so few portfolio managers beat market benchmarks over time, investors are better off buying index funds and paying lower fees. The Vanguard 500 Index Fund charges 18 cents for each $100 of assets. The average fee for an actively managed mutual fund is $1.25, according to Morningstar. “We follow Bogle’s philosophy: costs are paramount,” said Richard Ferri, a financial adviser in Troy, Michigan, with $300 million of client money invested in Vanguard ETFs. Criticism From Bogle Bogle, 80, criticized ETFs in a 2008 interview with Bloomberg Television, saying they encourage short-term trading. In a presentation this June hosted by the Web site IndexUniverse.com, he said ETFs are “great for institutional speculators,” and questioned their value for individual investors. Bogle was unavailable for comment, his assistant said. Bogle stepped down as Vanguard’s chief executive officer in 1996. Ferri said he prefers ETFs to index mutual funds because they are cheaper to own. Vanguard’s Total Stock Market ETF charges 9 cents for $100 in assets, half the 18 cents for the comparable index fund, Bloomberg data show. The Vanguard Emerging Markets ETF charges 27 cents per $100, compared with 72 cents for iShares MSCI Emerging Markets Index, data from the two firms show. Vanguard’s ETF attracted more than twice as much money in September as the IShares product, according to Morningstar. Vanguard’s Total Bond Market ETF has taken in more than three times as much this year as the rival iShares Barclays Aggregate Bond Fund , Morningstar data show. The Vanguard ETF has a lower fee, according to numbers provided by the companies. Smaller Investors Matthew Hougan, editor of IndexUniverse.com, in Bar Harbor, Maine, said Vanguard has probably done best among cost-conscious smaller investors who buy and hold their ETFs. The cost of holding an ETF isn’t “the end-all and be- all,” Hougan wrote in an e-mail. Bigger investors are more focused on transaction expenses and the ease with which an ETF can be bought and sold, he said. Barclays has had an edge in those areas because its funds have more assets and greater daily trading volume, he said. Vanguard’s Papariello said about 20 percent of her firm’s ETF sales were to institutional investors. Brokers, planners and bank trust departments account for most of the sales, she said. The ETF gains haven’t cut into the firm’s mutual fund sales, according to Papariello. Vanguard’s stock and bond funds attracted $74.2 billion in the first nine months of the year, the most among mutual fund companies, Morningstar data show. Vanguard has $1 trillion in stock and bond funds. To contact the reporter on this story: Charles Stein in Boston at cstein4@bloomberg.net .

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Hooley Must Navigate Lawsuits, Balance Sheet Risk as State Street’s Chief

October 24, 2009

By Christopher Condon and Sree Vidya Bhaktavatsalam Oct. 23 (Bloomberg) — Joseph “Jay” Hooley , the 23-year State Street Corp. veteran named yesterday to succeed Chief Executive Officer Ronald Logue in March, will have to clean up $3 billion in unrealized losses while steering the largest money manager for institutions through a series of lawsuits. “ Jay Hooley certainly knows the business well,” Gerard Cassidy , an analyst with RBC Capital Markets in Portland, Maine, said in an interview. “The main challenge for him is to navigate” the problems created by the credit crisis. State Street this year cut its quarterly dividend, halved bonuses and raised $2.5 billion to repay government aid and prop up capital depleted by mark-to-market losses in proprietary trading. The company faces a possible lawsuit from the U.S. Securities and Exchange Commission over bond funds that lost money on mortgage-backed securities, and was sued this week for $200 million by California for allegedly defrauding two state pension funds through unfair fees. Logue, 64, led State Street through the credit-market crisis that began with the collapse of the subprime-mortgage market in 2007 and resulted in losses in the company’s investment portfolio and commercial paper programs. The crisis culminated in a record $3.3 billion loss for State Street in the second quarter as the company wrote down the value of debt investments. Logue, who has presided over a 4.9 percent drop in State Street’s share price since he took over as CEO in June 2004, will stay on as non-executive chairman of the Boston-based company’s board of directors until Jan. 1, 2011, State Street said yesterday. Hooley, 52, was elected to the board of directors effective immediately. Unrealized Losses State Street on Oct. 20 lowered its estimates for 2009 operating revenue and earnings, causing shares to decline the most in five months. Third-quarter earnings rose 8.1 percent to $516 million after it cut jobs and the stock-market rebound bolstered fees. Earnings last year were hurt by a $200 million provision the Boston-based made to cover potential losses from loans to bankrupt Lehman Brothers Holdings Inc. Unrealized losses in State Street’s investment portfolio decreased to $2.99 billion, after taxes, from $4.75 billion at the end of the second quarter, and from $6.32 billion as of Dec. 31. Unrealized losses represent what State Street would lose if it were forced to sell the securities in its investment portfolio at current market prices. Thomas McCrohan , an analyst at Janney Montgomery Scott LLC in Philadelphia, said in an interview he expects the company may write down more unrealized losses on its balance sheet and build up litigation reserves at the end of this quarter. Rising Through Ranks “Typically, this is an opportunity for a company to clean up its balance sheet and give the incoming CEO a clean slate,” McCrohan said. Hooley, a Massachusetts native and graduate of Boston College, joined State Street in 1986. He has served as vice chairman since 2006 and chief operating officer since 2008. He is responsible for the company’s asset-servicing businesses worldwide. Hooley ran National Financial Data Services, a joint venture between State Street and Kansas City-based DST Systems Inc., from 1988 to 2000. He shifted in 2000 to managing the parent company’s global-investment-servicing division. “Ron and Jay have worked together for many years, so it’s a non-event from a business-continuance point of view,” said John Hailer , CEO of Natixis Global Asset Management LP, the Boston-based unit of French bank Natixis, and a customer of State Street’s. State Street provides record-keeping and transaction- processing services for funds managed by Natixis. Talking Hockey “Jay is a terrific guy and will be a terrific CEO,” Hailer said. “He’s a guy who can talk about the highest level finance, and who can also sit back and talk about the Boston Bruins just as easily,” he said, referring to the city’s professional hockey team. Logue, who has bachelor’s and master’s degrees from Boston College, joined State Street in 1990 as senior vice president and head of investment service for U.S. mutual funds. He was named chief operating officer in 2000 and president a year later. Logue oversaw the $4.2 billion purchase of Investors Financial Services Corp. in 2007, the company’s largest acquisition. During his tenure, State Street received $2 billion under the government’s Troubled Asset Relief Program in November 2008. In June, it became the first of the program’s original recipients to repay the bailout money in full. Logue also expanded the company’s proprietary investment portfolio and its commercial paper programs, or conduits, which were hurt by the credit crisis starting in 2008. ‘Too Large’ “I think it’s fair to say the commercial paper programs were too large,” Kevin Conn , an equity analyst at Massachusetts Financial Services Co. who has covered State Street for more than a decade, said in an interview. “But it wouldn’t be fair to say there was a risk-taking culture at State Street.” State Street is the third-largest custody bank, overseeing $13.3 trillion. Assets under custody grew 46 percent under Logue as of Sept. 30. The amount of money the company invests on behalf of clients rose 45 percent to $1.74 trillion. The company fell 86 cents, or 1.8 percent, to $45.82 at 11:53 a.m. in New York Stock Exchange composite trading. It has risen 16 percent this year, compared with the 28 percent gain by Standard & Poor’s 15-member index for asset managers and custody banks. Custody banks keep records, track performance and lend securities to institutional investors including mutual funds, pension funds and hedge funds. The company’s money-management unit, State Street Global Advisors, operates mutual funds and investment accounts for institutions and wealthy individuals. To contact the reporters on this story: Christopher Condon in Boston at ccondon4@bloomberg.net ; Sree Vidya Bhaktavatsalam in Boston at sbhaktavatsa@bloomberg.net .

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SSgA Floats VRDO Municipal Bond ETF

September 27, 2009

State Street Global Advisors has launched a new ETF on the NYSE Arca

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Bond Funds Swell by $295 Billion, Fueling Debt Rally, Bank of America Says

September 25, 2009

By Jody Shenn Sept. 25 (Bloomberg) — Cash continues to pour into bond funds , helping to explain the size of the credit-market rally as recent inflows exceed those in stock funds by the most since at least 1993, according to Bank of America Corp. analysts. About $295 billion has been added this year to funds targeting debt including corporate bonds, bank loans and municipal notes as investors seek to limit risk-taking as they shift from money-market funds , which have shrunk $334 billion, the analysts wrote in a report yesterday, citing AMG/Lipper Data Services. Net outflows from equity funds have been trimmed to $31 billion, from $77 billion in April. The flow of money into bonds, with the Federal Reserve buying $1.75 trillion of debt, has helped inflate values along with signs that the economy and markets are healing. Yields on high-yield, high-risk corporate bonds have tumbled to 7.54 percentage points more than Treasuries, from a record high of 19.7 percentage points last December, according to Barclays Capital index data . “Investor preference for security and stable coupons following Lehman’s collapse is finding its reflection in overwhelming flows into fixed-income products as opposed to equities,” the New York-based Bank of America analysts Oleg Melentyev and Mike Cho wrote. “This also helps explain why credit is leading stocks in this market rebound.” Post-Lehman Spreads Yield spreads on investment-grade and junk corporate bonds, along with other debt including top-rated asset-backed securities, have fallen below their levels before New York-based Lehman Brothers Holdings Inc. filed for bankruptcy protection on Sept. 15, 2008, sending global asset markets into a tailspin. Through yesterday, the Standard & Poor’s 500 stock index dropped 16 percent since Sept. 12, 2008, just before the Lehman bankruptcy. The difference between flows into bond and equity funds, calculated as a percentage of assets over trailing six-month intervals, currently is 22 percent, the highest since at least 1993, according to Bank of America. “As the systemic risk has faded, all of that available capital that came out of the equity markets, that came out of other financial assets — the first step back into risky assets has been toward riskier bonds,” said William Cunningham , head of credit strategies and fixed-income research at State Street Global Advisors in Boston. “So any bonds with a substantial risk premium versus traditional governments have been the beneficiary,” he said in an interview. State Street oversees $1.6 trillion in assets. — With assistance from Shannon Harrington in New York. Editors: Charles W. Stevens , Mitchell Martin . To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net or

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Sovereign Funds Curb Risk Appetite After Criticism of Losses, Report Says

August 19, 2009

By Poppy Trowbridge Aug. 19 (Bloomberg) — Sovereign wealth funds are seeking safer investments after facing “vehement” domestic criticism over losses linked to the credit crisis and a plunge in oil prices, analysts at State Street Corp. said. “Criticism by the national media for their high-profile losses might even jeopardize their ability to take the long-term investment positions that have given them such a comparative advantage,” John Nugée , managing director and head of the official institutions group at Boston-based State Street, told reporters at a briefing in London yesterday. Sovereign funds, together worth about $3.2 trillion, operate as government-owned, special purpose investment vehicles. They are slashing risk, shoring up liquidity and investing more in their home markets after the credit crunch and a collapse in commodity prices led the value of their assets to plunge. The funds have also shrunk as governments tapped their capital reserves amid the global economic slump. Singapore’s Temasek Holdings Pte , Kuwait Investment Authority and China Investment Corp. are among the sovereign funds that helped struggling U.S. investment banks replenish more than $200 billion of capital. Securities linked to financial-services firms plummeted after the collapse of the U.S. subprime mortgage market in 2007. KIA and Temasek owned shares in Merrill Lynch & Co., which was bought by Bank of America in September after the shares slumped 35 percent. Traditionally silent stakeholders, some funds may consider taking a more active role as a result of their losses, according to State Street. Many of the funds are financed by oil revenue. Crude oil for September delivery was trading at $68.30 a barrel at 12:30 p.m. yesterday on the New York Mercantile Exchange. The price has collapsed from its record of $147.27 last July. To contact the reporter for this story: Poppy Trowbridge in London at ptrowbridge@bloomberg.net

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Stocks in U.S. Fall on Valuation Concern; Lilly, Best Buy, Nucor Retreat

August 10, 2009

By Kayla Carrick Aug. 10 (Bloomberg) — U.S. stocks fell, led by commodity producers and retailers, after four straight weeks of gains left the Standard & Poor’s 500 Index trading at the highest level relative to earnings since 2004. European equities also dropped, while Treasuries rose for the first time in six days. 3M Co. , Cisco Systems Inc. and Alcoa Inc. led the Dow Jones Industrial Average lower. Eli Lilly & Co. and Best Buy Co. lost at least 3 percent after Goldman Sachs Group Inc. cut its rating on the shares. State Street Corp. slid 2.4 percent after saying it may exhaust $625 million in reserves set aside in 2007 to settle claims stemming from losses linked to subprime mortgages. The S&P 500 slipped from a 10-month high, retreating 0.3 percent to 1,007.1 as of 4:05 p.m. in New York. The Dow average fell 32.12 points, or 0.3 percent, to 9,337.95. Four stocks fell for every three that rose on the New York Stock Exchange. “It’s reasonable to think that the market would take a breather after recent weeks,” said Lawrence Creatura , a Rochester, New York-based money manager at Federated Investors Inc., which oversees $407 billion. “It’s not natural for one- way markets to last long. A little pause would be normal and perhaps healthy.” The S&P 500 climbed 2.3 percent last week, rising above 1,000 for the first time since November, as better-than- estimated employment, manufacturing and home-sales data boosted confidence that the recession is ending. The index jumped 49 percent from a 12-year low on March 9 through last week, the steepest surge since the Great Depression, as three quarters of its companies that posted second-quarter earnings beat consensus analyst estimates. Valuation Watch The S&P 500 was valued at 18.6 times the profits of its companies as of the start of trading, the highest ratio since December 2004. The index must rally 55 percent to surpass its all-time high of 1,565.15 set on Oct. 9, 2007. Before November, it had remained above 1,000 for five years. “There is a gradual period of slow growth beginning in the economy,” said Joseph Keating , who oversees $4 billion as chief investment officer of Raleigh, North Carolina-based RBC Bank, a unit of Royal Bank of Canada. “But investors are a little concerned that we’re getting ahead of ourselves.” Options traders have increased bets that the S&P 500’s rally won’t survive September, historically the worst month for U.S. equities. Bearish VIX Bets Traders are betting the VIX , a gauge of expected stock swings, will increase 13 percent in the next five weeks, according to futures prices compiled by Bloomberg as of Aug. 7. That’s the biggest spread since August 2008, right before the S&P 500 suffered the steepest two-month plunge in 21 years. The indexes have moved in the opposite direction 81 percent of the time over the past five years, Bloomberg data show. 3M, the maker of 55,000 products, lost 2.7 percent to $70.91. Cisco, the largest maker of networking equipment, fell 2.5 percent to $21.64. Alcoa, the biggest U.S. aluminum company, retreated 2.4 percent to $12.69. Eli Lilly dropped 3 percent to $33.83. Goldman Sachs downgraded the drugmaker to “sell” from “neutral” and added the stock to its “conviction sell” list, saying its “patent cliff” is the largest in the industry. Best Buy slipped 5.3 percent to $37.66. Goldman Sachs reduced its recommendation on shares of the world’s largest electronics retailer to “neutral” from “buy,” citing competition, “erosion” in entertainment software and “aggressive” spending to fuel growth. State Street Slumps State Street, the manager of $1.6 trillion as of June 30, fell 2.4 percent to $52.57. Its reserve “may not be sufficient to address ongoing litigation” if the U.S. Securities and Exchange Commission sues State Street and seeks monetary penalties, the Boston-based custody bank said in a regulatory filing today. Producers of raw materials slumped 1.6 percent collectively, the steepest drop among 10 industries in the S&P 500. The group has rallied 23 percent in the past month. Dow Chemical Co., the largest U.S. chemical company, slid 3.1 percent to $22.33. Nucor Corp., the nation’s second biggest steel producer, lost 4.1 percent to $47.10. “The groups that are the hardest hit today are those that have had the biggest moves during the recent rally,” said Marshall Front , who oversees about $500 million in Chicago as chairman of Front Barnett Associates LLC. “People have become wary, but whatever declines we see will be very contained and modest.” Gold producers retreated with the price of bullion, which fell 1.3 percent to $946.90 an ounce in New York, the steepest decline since July 28. Freeport-McMoRan Copper & Gold Inc., which operates the world’s biggest gold mine, fell 1.6 percent to $62.38. ‘Focus on the Consumer’ A group of retailers, homebuilders, restaurant chains and other so-called consumer discretionary companies, which has gained 64 percent since March 9, fell 1.2 percent today for the second-biggest decline among the 10 main S&P 500 industries. Ford Motor Co. retreated 3.6 percent to $7.72, and Lowe’s Cos., the second-biggest U.S. home improvement retailer, fell 2.2 percent to $23.33. “There’s a lot of focus on the consumer,” said Wayne Reisner , president of Carret Asset Management in New York, which oversees $1.4 billion. “It’s still a dicey call because consumers are not completely flush at the moment and incomes are not rising at a dramatic rate.” Consumer bankruptcies have risen more than a third this year and may hit 1.4 million by Dec. 31 as jobs are lost and loans are harder to get, according to the trade group American Bankruptcy Institute. More than 126,000 consumers filed for bankruptcy in the U.S. last month, 34 percent more than in July 2008, the ABI said. Timber Prices Timber producers retreated after Barron’s reported prices may decline as much as 50 percent in coming years, according to the weekly newspaper’s Aug. 10 issue. Plum Creek Timber Co. tumbled 4.4 percent to $33.56. Allied Capital Corp. fell 11 percent to $3.44, the lowest closing price since July 14. The buyout and lending firm reported second-quarter profit excluding some items of 10 cents a share, missing the average analyst estimate by 49 percent. The company also said it has defaulted on some debt covenants and it will not pay its dividend for an “extended period of time.” Research In Motion Ltd., the maker of the BlackBerry smartphone, fell after it was downgraded to “neutral” from “buy” by analyst Maynard Um at UBS, who said the shares are expensive. The shares retreated 4.9 percent to $73.28. Freddie Rallies Freddie Mac , which has been relying on $200 billion in financing pledged by the Treasury to stay afloat since regulators seized the company in September, jumped 128 percent to $1.69 after reporting its first profit in two years. The mortgage-finance company reported second-quarter net income of $768 million and didn’t ask the U.S. Treasury for more aid. McDonald’s Corp. , the world’s largest restaurant company, added 1.9 percent to $56.27 for the best gain in the Dow after reporting global sales rose 4.3 percent in July, more than some analysts estimated, on demand for hamburgers and McCafe coffees. Priceline.com Inc ., an internet travel agency, advanced 14 percent to $150.24 after it forecast third-quarter profit above analysts’ estimates. The company said third-quarter earnings will be $2.70 to $2.85 a share, on an adjusted basis. The average of 13 analysts’ estimates is $2.57 a share. Barnes & Noble Inc. rallied 4 percent to $25.01, the highest closing price since June 4. The largest U.S. bookstore chain agreed to buy Barnes & Noble College Booksellers Inc. for $596 million from Leonard Riggio , the retailer’s chairman and founder. Mobius Predicts Declines Mark Mobius said global stocks will drop as much as 30 percent after advancing from multiyear lows and as companies increase share sales. The slide “can happen anytime, probably this year,” Mobius, the executive chairman of Templeton Asset Management Ltd., said in an interview in Kuala Lumpur today. He said he was referring to shares “globally.” Warren Buffett ’s Berkshire Hathaway Inc. is buying corporate debt and securities issued by governments outside the U.S. as the billionaire investor’s spending on stocks falls to the lowest in more than five years, according to an Aug. 7 regulatory filing. Buffett is increasing fixed-income investments after results slumped at operating units including NetJets Inc., the money-losing plane-rental business, and companies in Berkshire’s equity portfolio including Wells Fargo & Co. slashed dividends. To contact the reporter on this story: Kayla Carrick in New York at kcarrick1@bloomberg.net

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Stocks in U.S. Fall on Valuation Concern; Lilly, Best Buy, Nucor Retreat

August 10, 2009

By Kayla Carrick Aug. 10 (Bloomberg) — U.S. stocks fell, led by commodity producers and retailers, after four straight weeks of gains left the Standard & Poor’s 500 Index trading at the highest level relative to earnings since 2004. European equities also dropped, while Treasuries rose for the first time in six days. 3M Co. , Cisco Systems Inc. and Alcoa Inc. led the Dow Jones Industrial Average lower. Eli Lilly & Co. and Best Buy Co. lost at least 3 percent after Goldman Sachs Group Inc. cut its rating on the shares. State Street Corp. slid 2.4 percent after saying it may exhaust $625 million in reserves set aside in 2007 to settle claims stemming from losses linked to subprime mortgages. The S&P 500 slipped from a 10-month high, retreating 0.3 percent to 1,007.1 as of 4:05 p.m. in New York. The Dow average fell 32.12 points, or 0.3 percent, to 9,337.95. Four stocks fell for every three that rose on the New York Stock Exchange. “It’s reasonable to think that the market would take a breather after recent weeks,” said Lawrence Creatura , a Rochester, New York-based money manager at Federated Investors Inc., which oversees $407 billion. “It’s not natural for one- way markets to last long. A little pause would be normal and perhaps healthy.” The S&P 500 climbed 2.3 percent last week, rising above 1,000 for the first time since November, as better-than- estimated employment, manufacturing and home-sales data boosted confidence that the recession is ending. The index jumped 49 percent from a 12-year low on March 9 through last week, the steepest surge since the Great Depression, as three quarters of its companies that posted second-quarter earnings beat consensus analyst estimates. Valuation Watch The S&P 500 was valued at 18.6 times the profits of its companies as of the start of trading, the highest ratio since December 2004. The index must rally 55 percent to surpass its all-time high of 1,565.15 set on Oct. 9, 2007. Before November, it had remained above 1,000 for five years. “There is a gradual period of slow growth beginning in the economy,” said Joseph Keating , who oversees $4 billion as chief investment officer of Raleigh, North Carolina-based RBC Bank, a unit of Royal Bank of Canada. “But investors are a little concerned that we’re getting ahead of ourselves.” Options traders have increased bets that the S&P 500’s rally won’t survive September, historically the worst month for U.S. equities. Bearish VIX Bets Traders are betting the VIX , a gauge of expected stock swings, will increase 13 percent in the next five weeks, according to futures prices compiled by Bloomberg as of Aug. 7. That’s the biggest spread since August 2008, right before the S&P 500 suffered the steepest two-month plunge in 21 years. The indexes have moved in the opposite direction 81 percent of the time over the past five years, Bloomberg data show. 3M, the maker of 55,000 products, lost 2.7 percent to $70.91. Cisco, the largest maker of networking equipment, fell 2.5 percent to $21.64. Alcoa, the biggest U.S. aluminum company, retreated 2.4 percent to $12.69. Eli Lilly dropped 3 percent to $33.83. Goldman Sachs downgraded the drugmaker to “sell” from “neutral” and added the stock to its “conviction sell” list, saying its “patent cliff” is the largest in the industry. Best Buy slipped 5.3 percent to $37.66. Goldman Sachs reduced its recommendation on shares of the world’s largest electronics retailer to “neutral” from “buy,” citing competition, “erosion” in entertainment software and “aggressive” spending to fuel growth. State Street Slumps State Street, the manager of $1.6 trillion as of June 30, fell 2.4 percent to $52.57. Its reserve “may not be sufficient to address ongoing litigation” if the U.S. Securities and Exchange Commission sues State Street and seeks monetary penalties, the Boston-based custody bank said in a regulatory filing today. Producers of raw materials slumped 1.6 percent collectively, the steepest drop among 10 industries in the S&P 500. The group has rallied 23 percent in the past month. Dow Chemical Co., the largest U.S. chemical company, slid 3.1 percent to $22.33. Nucor Corp., the nation’s second biggest steel producer, lost 4.1 percent to $47.10. “The groups that are the hardest hit today are those that have had the biggest moves during the recent rally,” said Marshall Front , who oversees about $500 million in Chicago as chairman of Front Barnett Associates LLC. “People have become wary, but whatever declines we see will be very contained and modest.” Gold producers retreated with the price of bullion, which fell 1.3 percent to $946.90 an ounce in New York, the steepest decline since July 28. Freeport-McMoRan Copper & Gold Inc., which operates the world’s biggest gold mine, fell 1.6 percent to $62.38. ‘Focus on the Consumer’ A group of retailers, homebuilders, restaurant chains and other so-called consumer discretionary companies, which has gained 64 percent since March 9, fell 1.2 percent today for the second-biggest decline among the 10 main S&P 500 industries. Ford Motor Co. retreated 3.6 percent to $7.72, and Lowe’s Cos., the second-biggest U.S. home improvement retailer, fell 2.2 percent to $23.33. “There’s a lot of focus on the consumer,” said Wayne Reisner , president of Carret Asset Management in New York, which oversees $1.4 billion. “It’s still a dicey call because consumers are not completely flush at the moment and incomes are not rising at a dramatic rate.” Consumer bankruptcies have risen more than a third this year and may hit 1.4 million by Dec. 31 as jobs are lost and loans are harder to get, according to the trade group American Bankruptcy Institute. More than 126,000 consumers filed for bankruptcy in the U.S. last month, 34 percent more than in July 2008, the ABI said. Timber Prices Timber producers retreated after Barron’s reported prices may decline as much as 50 percent in coming years, according to the weekly newspaper’s Aug. 10 issue. Plum Creek Timber Co. tumbled 4.4 percent to $33.56. Allied Capital Corp. fell 11 percent to $3.44, the lowest closing price since July 14. The buyout and lending firm reported second-quarter profit excluding some items of 10 cents a share, missing the average analyst estimate by 49 percent. The company also said it has defaulted on some debt covenants and it will not pay its dividend for an “extended period of time.” Research In Motion Ltd., the maker of the BlackBerry smartphone, fell after it was downgraded to “neutral” from “buy” by analyst Maynard Um at UBS, who said the shares are expensive. The shares retreated 4.9 percent to $73.28. Freddie Rallies Freddie Mac , which has been relying on $200 billion in financing pledged by the Treasury to stay afloat since regulators seized the company in September, jumped 128 percent to $1.69 after reporting its first profit in two years. The mortgage-finance company reported second-quarter net income of $768 million and didn’t ask the U.S. Treasury for more aid. McDonald’s Corp. , the world’s largest restaurant company, added 1.9 percent to $56.27 for the best gain in the Dow after reporting global sales rose 4.3 percent in July, more than some analysts estimated, on demand for hamburgers and McCafe coffees. Priceline.com Inc ., an internet travel agency, advanced 14 percent to $150.24 after it forecast third-quarter profit above analysts’ estimates. The company said third-quarter earnings will be $2.70 to $2.85 a share, on an adjusted basis. The average of 13 analysts’ estimates is $2.57 a share. Barnes & Noble Inc. rallied 4 percent to $25.01, the highest closing price since June 4. The largest U.S. bookstore chain agreed to buy Barnes & Noble College Booksellers Inc. for $596 million from Leonard Riggio , the retailer’s chairman and founder. Mobius Predicts Declines Mark Mobius said global stocks will drop as much as 30 percent after advancing from multiyear lows and as companies increase share sales. The slide “can happen anytime, probably this year,” Mobius, the executive chairman of Templeton Asset Management Ltd., said in an interview in Kuala Lumpur today. He said he was referring to shares “globally.” Warren Buffett ’s Berkshire Hathaway Inc. is buying corporate debt and securities issued by governments outside the U.S. as the billionaire investor’s spending on stocks falls to the lowest in more than five years, according to an Aug. 7 regulatory filing. Buffett is increasing fixed-income investments after results slumped at operating units including NetJets Inc., the money-losing plane-rental business, and companies in Berkshire’s equity portfolio including Wells Fargo & Co. slashed dividends. To contact the reporter on this story: Kayla Carrick in New York at kcarrick1@bloomberg.net

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OPERS Asks SSgA BGI For Revised Bids

July 27, 2009

Oklahoma Public Employees Retirement System has asked State Street Global Advisors and Barclays Global Investors to update proposals for three assignments of about 16 billion

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Pimco Plans First Actively Run ETFs in Bid to Match Barclays, State Street

July 22, 2009

By Sree Vidya Bhaktavatsalam July 22 (Bloomberg) — Pacific Investment Management Co. plans to open its first actively run exchange-traded funds as the world’s biggest bond manager seeks to catch up with rivals in the fastest-growing segment of the mutual fund business. Pimco will offer five ETFs in which the investments are selected by portfolio managers, according to a registration statement filed today with the U.S. Securities and Exchange Commission by the Newport Beach, California-based company

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