STT State Street Corporation

State Street Global Advisors (SSgA), the investment management arm of State Street Corporation (NYSE: STT), and the largest institutional fund manager in the world, announced today that it has been appointed by Universities Superannuation Scheme Limited (USS) to manage a $200 million hedge fund replication mandate. The portfolio will be specifically tailored to meet USS�s investment objectives and will be managed on a segregated basis by SSgA. SSgA has worked in conjunction with leading hedge fund academics Bill Fung and Narayan Naik of London Business School and David Hsieh of Duke University, as well as the consultant firm of JTP Partners LLP, in developing a unique offering for USS. This offering, Hedge Fund Beta Replication Strategy, is aimed at replicating the average performance of a universe of hedge funds through modern indexing techniques based on Fung, Hsieh and Naik�s sophisticated analysis of the investment returns of hedge funds. USS is one of the first UK pension funds to recognize the importance of hedge fund replication strategies as part of its overall strategy for alternative investments. �We are convinced of the merits of hedge fund replication as a way of gaining transparent, liquid and low-cost exposure to the risk premia that drive the majority of hedge fund returns. We see this strategy as a core part of our integrated approach to investing in hedge funds alongside our single manager hedge fund program,� said Michael Powell, head of alternatives at USS. �We are pleased to be working with SSgA and the partnership it has forged with Professors Fung, Hsieh and Naik, to bring the benefits of hedge fund replication to USS. In addition, we are pleased to appoint JTP Partners LLP as consultants who will provide ongoing, independent risk management on the portfolio.� Academic analysis has shown that up to 85 percent of returns observed by the average hedge fund of funds can be attributed to a collection of risk premia of market returns rather than the active management skills of hedge fund managers. These risk premia include equities, credit, bond market duration and market volatility, all of which can be replicated by SSgA. The underlying philosophy is that average hedge fund returns can be achieved at a significantly lower cost by constructing portfolios using model-based factor exposures. For many investors, the cost savings, the diversified collection of beta and the avoidance of manager-specific risk can make a synthetic hedge fund replication approach an appealing alternative to direct hedge fund exposure. �Investing in hedge funds presents a number of challenges, for example: selecting today the manager that will outperform in the future; transparency; limited capacity; manager specific risks; and high costs. The hedge fund beta strategy aims to address those concerns,� said Kanesh Lakhani, managing director for SSgA in the UK. �This strategy offers clients the opportunity to adopt a core/satellite approach to hedge fund investing. Increasingly clients insist on separating investment portfolios into alpha and beta returns. The hedge fund beta strategy allows clients to make a passive allocation to access beta, and to only pay hedge fund-like fees where they can identify genuine hedge fund alpha producers.� Lakhani added, �We are delighted with this mandate from USS. The strong interest we have seen from clients globally in Hedge Fund Beta suggests this could be the first of many new clients to adopt this innovative approach to accessing hedge fund returns.� About State Street Global Advisors: State Street Global Advisors, the investment management arm of State Street Corporation (NYSE: STT), delivers investment strategies and integrated solutions to clients worldwide across every asset class, investment approach and style. With $2 trillion in assets under management at 31 December 2007, State Street Global Advisors has investment centers in Boston, Hong Kong, London, Milan, Montreal, Munich, Paris, Singapore, Sydney, Tokyo and Zurich, and offices in 27 cities worldwide. For more information, visit State Street Global Advisors at www.ssga.com.