State Street got hit with a one-two combination of bad news today. The Boston Globe reported that the State Street Limited Duration bond Fund lost about 37 percent of its value during the first three weeks of August. Meanwhile, the Times of London woke everyone up early this morning with a report that State Street has $22 billion of exposure to asset-backed commercial paper conduits, off-balance sheet vehicles that have led to troubles for rival financial institutions during the recent credit market turmoil.
It’s a terrible mix of news. The losses in the supposedly conservative bond fund would place it among this summer’s worst casualties. “Both the level of underperformance and the degree of market turmoil are unprecedented in our 30-year history as a fixed income manager,” State Street’s Sean P. Flannery has told clients in a letter.
See? It’s totally not their fault. These things never happen. Except, you know, when they do.
On the conduit thing, State Street has credit lines to at least six of these off-balance sheet vehicles, which make up or 17 per cent of its total assets, according to the Times. The Times says its reporting is based on regulatory filings. “That proportion makes State Street the most highly exposed bank to conduits among its European and American peers,” the Times reports.
Update 11:23: State Street shares fell nearly 3% this morning.
Further fiasco[Boston Globe]
State Street bank has highest exposure to conduits [The Times]
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plunged? at last look to me STT is down 1.60 on a $60 stock. if down 2.5% is a “plunge”, then what word do you use for a stock being down, say, 15%?
better one – how could you say the stock plunged at 9:06? market was still 24 minutes from opening. maybe it traded off in the premarket, but theres a reason things move too much then – light volumes.
take some Deep breaths “arbman”…we all knew what he meant…jesus
Plunge might have been dramatic. We’ve updated it to “fell.”
or maybe they can see the future…
So when is the “Fall Protection Team” gonna start buying those S&P futures, hmmmmmm? Hedge fund guys gotta eat too, ya know.
does anyone know the ticker symbol on this fund. morningstar aint cooperating
no its not functioning on bberg either.
there is no ticker symbol. its an institutional fund sold to institutional investors only. check out ssga-yield plus and ssga-bond fund if you want to see similar problems but not levered funds. their problems incl selling protection on ABX index via CDS mkt and buying too much subprime. Yield plus incl such stellar MBS/ABS securities as CBASS (insolvent subprime lender), etc.
thanks junkbmw
yeah i read it properly when i got home.
good thing the poor clients saved 18 bps on the expense ratio by going the institutional route!
some people were born to be customers