State Street Vision Paper Reveals Asset Owners’ New Perspective on Asset Allocation Strategies
December 04 2012 - 12:00PM
Business Wire
State Street Corporation (NYSE: STT) today announced the
findings of its new Vision paper entitled, “The Asset Owners’
Perspective: Evolving Investment and Operational Models.” The
report explores how the continued volatility of global financial
markets has identified weaknesses in investment portfolios, causing
institutional investors to reconsider their asset allocation
strategies. As a result, investors are utilizing new approaches to
liquidity management to modify their portfolio mix and balance the
need for liquidity with the need for returns.
State Street’s research found:
- The top actions taken by asset owners
to address the liquidity crunch include more vigorous stress
testing and the revisions of liquidity-related investment
policies.
- Fixed income investing remains a growth
area among defined-benefit pension plans. Thirty-nine percent of
corporate plans surveyed expect to increase allocations to
corporate investment-grade debt and 30 percent of public plans
anticipate expanding allocations to emerging market debt
investments in the coming year.
- Nearly 84 percent of respondents still
consider the endowment model of investing a highly effective
framework for today’s markets.
- Forty-five percent of asset owners
reported that low yields on traditional assets have increased their
organization’s appetite for alternatives, particularly among
institutions at the smaller end of the market.
- Data integration remains a top
operational challenge. Nearly half of respondents cited challenges
with achieving a comprehensive analysis of their portfolio and
two-thirds expect their data management needs to increase over the
next three years.
“Many asset owners are now placing liquidity high among their
priorities for asset allocation decisions and reevaluating their
liquidity management approach,” said Dan Farley, senior managing
director and chief investment officer for State Street Global
Advisor’s Investment Solutions Group. “This has led to the adoption
of new asset allocation frameworks that focus on optimizing the
trade-off between risk and return based on the unique
characteristics of each portfolio. Asset owners must carefully
consider their approach to this equation and consider more dynamic
methods of generating returns using various liquidity
strategies.”
“The two biggest challenges for asset owners right now are risk
management and investment complexity. These are industry challenges
that must be met head on with increased transparency and new
technologies to help investors manage complex exposures while
remaining focused on generating returns,” said Rebecca Schechter,
senior vice president and head of Foundations and Endowments at
State Street.
State Street’s Vision Series addresses key trends and
developments impacting the financial services industry. Previous
reports have focused on regulatory implications, emerging markets,
alternatives and technology innovation. To download a copy of this
Vision Focus report or others in State Street’s Vision series of
in-depth reports, please visit www.statestreet.com/vision.
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 $23.4 trillion in assets
under custody and administration and $2.1 trillion in assets under
management at September 30, 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 ($75.3
billion as of September 30, 2012), for which State Street Global
Markets, LLC, an affiliate of State Street Global Advisors serves
as the marketing agent.
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