State Street Corporation (NYSE: STT) today announced that it has been selected by Blackstone Alternative Asset Management (BAAM) and Legg Mason for liquid alternatives fund servicing. Liquid alternatives refer to alternative investment strategies that are available through investment vehicles such as mutual funds, ETFs or closed-end funds that provide daily, weekly or biweekly liquidity.
In the US, liquid alternatives commonly take the form of Securities and Exchange Commission registered investment companies, often referred to as 40 Act funds. State Street offers reporting, compliance, accounting, custody, settlement and analytics services to liquid alternative fund managers and also services 14 of the top 25 liquid alternatives funds
“Liquid alternatives present both opportunities and challenges for asset managers including distribution, organization and operations,” said Alan Greene, executive vice president at State Street. “Our fully integrated technology platform takes care of the day-to-day back office functions of collateral management and offers one-stop shopping for reporting, compliance, accounting, custody, settlement and analytics. By taking the operational risk off their shoulders, we can help our clients focus on harnessing value from new sources.”
“We appreciate State Street’s partnership with BAAM for the launch of our first liquid alternative fund,” said Art Liao, chief financial officer of BAAM. “The goal of implementing hedge fund strategies within the 40 Act rules in a multi-manager framework of hedge fund managers is extremely complex and underscores the importance of having the right partners making meaningful contributions.”
Liquid alternatives can be a viable way for both retail and institutional investors to help create a diversified investment portfolio that manages risk and achieve risk-adjusted returns. Nevertheless, many investors still harbor mistaken assumptions about them.
“When considering liquid alternatives, education is critical,” said Will Kinlaw, senior managing director and head of portfolio and risk management research at State Street Global Exchange. “Alternative asset managers must match product innovation with product education and help investors do their homework to determine if liquid alternatives are a good option for their portfolio. Whether investors are looking for diversification, liquidity, performance or transparent fee structures, understanding the desired objective is first and foremost.”