STT State Street Corporation

By Sarah Krouse and Anne Steele 

State Street Corp. has agreed to buy General Electric Co.'s asset-management unit for up to $485 million as the Boston-based firm works to add scale to its money-management division.

The business, which includes GE's U.S. benefits plans as well as assets for third-party institutional clients, manages more than $100 billion in assets. The cash deal will give State Street Global Advisors, known for its index-tracking funds, a broader mix of money management abilities including private-equity and real-estate investments.

The deal comes as GE continues to make strides to exit the financial business by shedding assets of GE Capital. Since announcing its dismantling plan last April, GE has signed some $161 billion in deals.

State Street's money management business had $2.2 trillion in assets at the end of 2015 and includes a large lineup of ETFs, funds run by human stock and bond pickers and hedge-funds. The deal is poised to help State Street grow in the business of managing money for insurers and defined-benefit plans that outsource portfolio management.

Companies are increasingly switching to workplace retirement plans in which employees stash away money during their careers, rather than receiving a guaranteed payout from so-called defined benefit plans. As those plans wind down, firms are asking money managers to help them manage their remaining assets and liabilities.

Ron O'Hanley, chief executive officer of SSGA, said in an interview that growing the portion of the firm's business that helps companies and endowments that outsource investment decisions was a priority.

"There's a lot of appeal in the way they put together portfolios," using internal investment strategies and outside money managers, he said of GE's benefits plans. He added that the deal bolsters SSGA's alternatives and fixed-income expertise.

GE Asset Management put in place a staff retention program late last year to keep what the firm described as "key investment professionals and employees" in place.

Mr. O'Hanley, who was previously head of Fidelity's asset management business, joined SSGA early last year and has said he plans to expand the business in part through mergers-and-acquisition activity. This is his first deal at the firm.

At an investor day in February, he said retirement plan outsourcing, defined-contribution plans in which employees set aside money for retirement, ETFs and factor-based investing were among the areas of the business he aimed to grow.

State Street has been GE's custodian for 25 years, managed some assets for the firm and worked on some "middle office outsourcing", Mr. O'Hanley said.

The company said it expects the GE asset management deal to generate up to $300 million in revenue from the deal in the 12 months following its completion. The deal is expected to close in the third quarter.

Write to Sarah Krouse at sarah.krouse@wsj.com and Anne Steele at Anne.Steele@wsj.com

(END) Dow Jones Newswires

March 30, 2016 17:25 ET (21:25 GMT)

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