State Street Corp. is starting a hedge fund that will bet on macroeconomic events, part of an effort to expand its $2.37 trillion money-management arm beyond lower-paying passive strategies.
The strategy, run by Michael Ho and Lisa O’Connor, mostly makes directional bets on and against stocks, bonds, currencies and commodities globally, confirmed Anne McNally, a spokeswoman for State Street. The fund, seeded by State Street with $50 million at the end of 2013, this month won its first outside investor, Hartford HealthCare’s pension and endowment, which put in $33 million.
“I am thrilled to partner with SSGA as this newer hedge fund launch nicely aligns with the hospital’s conservative, risk-adverse goals,” David Holmgren, chief investment officer of the health-care network, said in an e-mail.
State Street is trying to expand its asset-management unit after its active strategies contracted and it lost ground to BlackRock Inc. and Vanguard Group Inc. in exchange-traded funds. The firm is adding hedge funds and alternative strategies that can be offered to individual investors, Ronald O’Hanley, who in April replaced Scott Powers as head of the money-management arm, said last month.
State Street is offering a similar strategy to retail clients through a mutual fund called State Street Macro Absolute Return Bond Fund, according to a regulatory filing dated July 23. The hedge fund version will charge a management fee of 1.5 percent and a 20 percent cut of profits, McNally said.
State Street in June said it named Ho, who previously ran active emerging market stock investing for the firm, to a newly created position of chief investment officer for alternatives. Before joining State Street in 2011, he managed more than $220 billion in assets for Mellon Capital Management. O’Connor, who is head of global macro portfolio management at State Street, previously ran the active fixed income group at Mellon Capital.
The team also includes head of research Dominik Boos, who used to work as senior investment strategist at the Swiss National Bank.