State Street Vision Paper Research Highlights New Paradigm in European Fund Industry

State Street Corporation (NYSE: STT), one of the world's leading providers of financial services to institutional investors, today announced the findings of a new Vision report featuring independent research carried out in conjunction with the Economist Intelligence Unit, pointing to the emergence of a new paradigm in Europe in which asset managers must adapt to the radically changing needs of investors in the wake of the financial crisis. This Vision paper, titled “The Changing Shape of European Investment Management – Volume 3: Navigating Complexity,” also explores other key factors that are shaping Europe’s asset management industry including changing investor needs, widespread regulatory reform and urgent demographic trends.

In this comprehensive study which surveyed more than 160 European asset managers, the most important factors driving investment decisions are yields (28 percent), risk aversion (27 percent), diversification away from mainstream asset classes (22 percent) and regulatory complexity/uncertainty (22 percent).* Asset managers are cautious about increasing assets under management, with less than a third expecting to increase AUMs by more than eight percent over the next two years.

Joe Antonellis, vice chairman of State Street and head of its Global Services and Global Markets business for Europe, Middle East, Africa and Asia Pacific commented, “Asset managers are seeking strategies to navigate the new environment and their quest for fresh ideas is driving a significant shift in approach. They are forging new relationships with investors and service providers and the benefits will go to those firms that can deliver innovative outcome-based solutions or genuine alpha. Those managers that cannot will struggle.”

Providing a high level of detailed and quality information to clients is the greatest data management challenge facing asset managers, according to 49 percent of respondents. Achieving sufficient scale with in-house systems was the second most cited challenge (44 percent) and providing accurate data to regulators and auditors in a timely fashion was third (33 percent). Nearly three in 10 asset managers (27 percent) say internal policies and procedures pose the greatest challenge when trying to quickly bring new products to market, with finding consensus among senior managers cited by 19 percent.

The State Street Vision report explores the structural changes occurring across the investment value chain as challenging times drive asset managers to redefine their roles and the roles of service providers in an evolving market environment.

For a copy of “The Changing Shape of European Investment Management – Volume 3: Navigating Complexity,” to view the accompanying webcast, or for volumes one or two of this series visit www.statestreet.com/vision/complexity.

*Source: 2012 State Street survey of 160 European asset managers conducted by the Economist Intelligence Unit

About State Street Corporation

State Street Corporation (NYSE: STT) is one of the world's leading providers of financial services to institutional investors including investment servicing, investment management and investment research and trading. With $23.2 trillion in assets under custody and administration and $2 trillion* in assets under management at March 31, 2012, State Street operates in 29 countries and more than 100 geographic markets. For more information, visit State Street’s web site at www.statestreet.com.

*This AUM includes the assets of the SPDR Gold Trust (approx. $68 billion as of March 31, 2012), for which State Street Global Markets, LLC, an affiliate of State Street Global Advisors serves as the marketing agent.

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