BOSTON--(BUSINESS WIRE)--March 29, 2006--State Street Corporation
(NYSE: STT), the world's leading provider of financial services to
institutional investors, released today its second institutional
investor hedge fund study. State Street conducted the study late last
year in conjunction with the 2005 Global Absolute Return Congress
(Global ARC). Survey respondents included global corporate pensions
(18 percent), public and government pensions (42 percent) and
endowments and foundations (40 percent) with investable assets
totaling more than U.S. $1 trillion.
According to State Street's study, most investment boards and
trustees of institutions (81 percent) have become more comfortable
with investing in hedge funds in the past year, and the majority (52
percent) of these governing bodies spend 15 percent or more of their
time discussing alternative investments. The survey also found that
most institutions intend to add new hedge fund and private equity
managers to their current manager line-up in the coming year.
"All signs indicate that what began as a niche category catering
mainly to high-net worth individuals and U.S. endowments and
foundations has become a permanent fixture within a broader set of
institutional portfolios," said Gary Enos, executive vice president
and head of State Street's alternative investment servicing business.
"Satisfied customers go a long way towards explaining the industry's
proliferation. Our study reveals hedge funds are meeting institutional
investors' expectations with an astounding 100 percent satisfaction
rate in achieving portfolio diversification as well as high marks for
lowering portfolio volatility and increasing absolute return."
Institutions Continue to Increase Hedge Fund and Private Equity
Allocations
According to the State Street study, nearly half (48 percent) of
respondents have 5 percent or more of their portfolios invested in
hedge funds today. Of this figure, most (44 percent) have 10 percent
or more invested in hedge funds. This represents an increase over
2004, when only 35 percent of institutions said they had 10 percent or
more invested in hedge funds.
For the first time, State Street also surveyed respondents about
the role of private equity in their portfolios. Ninety percent of
respondents allocate to private equity. Nearly half (47 percent)
allocated 5 percent or more to this strategy. Nineteen percent said
they allocate 10 percent or more.
Adding Alternative Investment Managers
Institutional investors who participated in State Street's study
also indicated that they have plans to hire new alternative investment
managers in the coming year. Eighty-six percent of respondents said
they plan to add new hedge fund managers to their current line-up,
while 67 percent said their hiring plans included new private equity
managers.
Separating "Alpha" and "Beta" Returns
The results of State Street's study also illustrate institutional
investors' growing appetite for separating asset class returns, or
beta, and absolute returns, or alpha. By disaggregating risk into
"alpha" and "beta" strategies, institutions can better tailor
portfolios to fit their specific investment objectives. Eighty-one
percent of survey respondents said they engaged new managers for both
alpha and beta returns, and a majority (59 percent) said they were
able to differentiate between a given manager's "alpha" and "beta"
results. Among those who said they could not differentiate (41
percent), an overwhelming majority (82 percent) attributed this
inability to a lack of tools and/or resources.
"As investors become more aware of the benefits of separating
alpha and beta, asset managers who can provide a wide range of beta
exposures and interchangeable alpha sources are uniquely positioned,"
said Jane Tisdale, managing director of hedge fund strategies for
State Street Global Advisors, the investment management arm of State
Street Corporation. "Access to customizable resources such as alpha
porting techniques offer increased transparency in measuring and
rewarding performance and allow the flexibility to increase portfolio
diversification with a low tracking error."
For a copy of the study's key findings, please contact
publicrelations@statestreet.com.
State Street Corporation (NYSE:STT) is the world's leading
specialist in providing institutional investors with investment
servicing, investment management and investment research and trading
services. With $10.1 trillion in assets under custody and $1.4
trillion in assets under management (as of 31 December 2005), State
Street operates in 26 countries and more than 100 geographic markets
worldwide. For more information, visit State Street's website at
www.statestreet.com.
This news release may contain forward-looking statements, as
defined by federal securities laws, including statements about the
financial outlook and business environment. Any such statements are
based on current expectations and involve a number of risks and
uncertainties. Important factors, including those mentioned in this
news release, that could cause actual results to differ materially are
set forth in the company's 2005 annual report and subsequent SEC
filings. They include risks and uncertainties relating to the pace at
which State Street adds new clients or at which existing clients use
additional services, the value of global and regional financial
markets, and the dynamics of the markets State Street serves. State
Street encourages investors to review its annual report and SEC
filings in conjunction with this announcement and prior to making any
investment decision. The forward-looking statements contained in this
news release speak only as of the date of release, March 29, 2006, and
the company does not undertake to revise those forward-looking
statements to reflect events after the date of this release.
CONTACT: State Street CorporationCarolyn Cichon, 617-664-8672
SOURCE: State Street Corporation