State Street Corp., Boston, voluntarily contributed $160 million in January 2008 and an additional $450 million in the fourth quarter to stable value accounts to bring the accounts back to market level, according to an 8-K filed by the bank on Jan. 16.
The accounts are managed by subsidiary State Street Global Advisors.
Further, fixed-income liquidity and pricing issues in 2008 so negatively affected the market value of SSgAs stable value accounts that third-party guarantors considered terminating their financial guarantees, leading SSgA to purchase about $2.5 billion of risky securities from the accounts, according to the 8-K.
Arlene C. Roberts, an SSgA spokeswoman, said the firm does not disclose the underlying investments of its stable value funds and that assets managed in such accounts represent considerably less than 1% of SSgA total assets. SSgA managed $13.9 billion in stable value funds as of Dec. 31, 2007, the most recent data the firm provided to Pensions & Investments.
Separately, the credit crunch dropped the value of some enhanced cash collateral pools managed by SSgA for securities-lending clients of its parent to below a net asset value of $1 per unit, according to the 8-K filing.
Securities-lending clients have a choice in the type of collateral pool that SSgA uses to manage the cash put up as collateral securities are borrowed, ranging from overnight settlement to registered money market funds to what SSgA labels enhanced cash, said Steven Meier, executive vice president and chief investment officer for global cash management strategies.
SSgA invests a portion of the enhanced cash collateral assets in traditional short-term money market instruments and in longer term unsecured debt and asset-backed securities, Mr. Meier said. The lack of a functioning secondary market for asset-backed securities has led to market value volatility that hurt the value of some SSgAs enhanced cash collateral pools, said Mr. Meier.