State Street Global Advisors of Boston - one of the nation's largest institutional money management firms but a relative unknown in the retail mutual fund business - will be raising its profile and expanding its distribution as a result of a new joint venture with Citigroup of New York.
State Street Corp. of Boston, SSgA's parent company, and Citigroup announced Dec. 8 that they have formed a joint venture to provide defined benefit plan investment management services and benefits administration in a joint venture called CitiStreet. State Street and Citigroup will share revenues equally from the deal, with State Street contributing its retirement services and human resources businesses to CitiStreet and Citigroup adding its retirement planning firm, The Copeland Cos. of East Brunswick, N.J.
The joint venture is an attempt to capture the strengths of the two companies, executives at the firms said. SSgA is known for its quantitative investment management and primarily services large companies in its $180 billion defined contribution business.
Citigroup focuses on its active money management and, through Copeland, serves the mid- and small-sized defined contribution market. The small market usually is considered companies with 100 or fewer employees, a Citigroup spokesperson said. Mid-sized plans have assets of approximately $75 million to $100 million, the spokesperson said.
The joint venture is complementary because of the different business strengths of State Street and Citigroup, said Robert C. Dughi, Copeland's founder and president of CitiStreet, in an interview.
"We're going to be targeting the whole spectrum of the [retirement] market," Dughi said.
CitiStreet should be a step toward making SSgA a more recognized label in the retail market. Citigroup's sales force alone - approximately 17,000 people including registered representatives at Salomon Smith Barney and agents of Travelers Insurance - equals the total number of employees at State Street Corp. SSgA now has about $20 billion of assets under management in mutual funds, said Liz Pease Kennedy, a spokesperson for SSgA.
"We're looking to expand our business to the mid- and small-plan [retirement] markets," Kennedy said.
SSgA is the third-largest money manager in the U.S. with approximately $582 billion in assets under management. Fidelity Investments of Boston is first, with assets of approximately $870.6 billion. Barclays Global Investors of San Francisco has $689 billion in assets under management.
The joint venture should raise awareness of SSgA among retail fund investors, said Ann Mahrdt, senior consultant for the Spectrem Group of San Francisco, a consulting firm that tracks the retirement market. The deal also joins State Street, known for its technological strength in serving institutional investors, with Citigroup's small-plan market distribution, Mahrdt said. State Street's technological resources can help to make the small plan market - where margins are narrower - more profitable for CitiStreet, Mahrdt said.
CitiStreet's headquarters will be in Quincy, Mass. The firm is expected to begin operations by June 30.