State Street Said To Pass Government Stress Test

Preliminary results of the government’s stress tests on the fiscal soundness of the nation’s biggest banks indicate that State Street Corp., the world’s largest money manager for institutions, does not have a need to raise billions of dollars in additional capital should the economy worsen. That’s good news in light of the fact the Boston-based company faces a slew of lawsuits from pension funds, institutional investors and others over claims State Street intentionally hid the risks of certain bond funds.

Earlier this month, Massachusetts Secretary of State William Galvin confirmed that his office had opened an investigation into State Street and its Limited Duration Bond Fund. At issue is the fact pension funds and other institutional investors invested in the Limited Duration Bond Fund as an “enhanced cash fund,” with the idea to generate better returns than ultra-safe, conservative money market funds with just slightly more risk. As it turns out, the Limited Duration Bond Fund held large concentrations of risky mortgage-backed assets.

When the subprime mortgage crisis unfolded in the summer of 2007, funds like the State Street Limited Duration Bond Fund took a huge hit, as did investors who suffered millions of dollars in losses.

The State Street Limited Duration Bond Fund is managed by State Street Global Advisors, State Street’s investment arm.

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses. 

This entry was posted on Thursday, May 7th, 2009 at 1:23 pmand is filed under Bond Funds, State Street Bond Funds. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.