State Street Corp., Boston, is seeking to expand the investment management capabilities of State Street Global Advisors or possibly sell the asset management unit, which as of Sept. 30 reported $3.15 trillion in assets under management.
Industry sources who spoke on condition of anonymity confirmed that Goldman Sachs Group Inc.'s New York-based investment banking unit has been discussing SSGA with potential acquirers, merger partners or collaborators, including Invesco Ltd., UBS Group AG and The Vanguard Group Inc.
Edward Patterson, a State Street spokesman, said in an email: "We are not commenting on … rumor or speculation" in response to a request for information.
Spokesmen for UBS, Vanguard and Goldman Sachs declined to comment and Invesco representatives did not respond to an email request for comment.
It's not clear what State Street Chairman and CEO Ronald P. O'Hanley might be considering.
"It's still a guessing game as we don't really know what they're contemplating. It could be an outright sale where (State Street) completely monetizes (SSGA) and moves away; it could be a merger with a rebranding; or it could be (that) they retain some ownership," said Brian R. Lauzon, managing director at InCap Group Inc., a Philadelphia-based investment bank.
He noted that "rebranding would be really interesting. They could change the name at the top, but not the products as (SSGA) really has built a phenomenal franchise and brand on the product side."
An observer who asked not to be named said, "Ron O'Hanley is in a great position to be a consolidator, to be acquisitive."
The source said "big banks with deep balance sheets in a perpetual low interest-rate environment are really reaching for fee revenue. State Street, with a really smart strategist like Ron O'Hanley at the helm, would be a logical buyer."
Another source who knows State Street well, but isn't privy to inside information about the bank's goals for SSGA, spoke on background, stressing that despite managing more than $3 trillion, mostly in passive strategies, SSGA needs yet more scale.
"SSGA benefits greatly from being part of State Street. About 35% of its AUM is from managing the cash and securities-lending accounts for the bank's massive asset-servicing business. That business is extremely profitable, accounting for 85% of the bank's revenues," the source said. State Street's ability to scale up the investment business is "staggering. The link to the bank's asset servicing side and its extensive ecosystem of asset servicing platforms means that any money management company it acquires can be smoothly and seamlessly incorporated," the source said.