US financial services groups State Street and Citigroup are to form a joint global benefits delivery company – Citistreet – in a bid to capture the growing DC market and demand for individual investment and benefit choices.
While bedding down operations in the US, Citistreet will also focus operations on European markets moving to funded pension provision – although details have yet to be announced.
The new company will have its headquarters in Quincy, Massachusetts, and will provide worldwide administrative, outsourcing and asset management services for DC, pension and health and welfare plans.
Nicholas Lopardo, vice-chairman of State Street Corporation, says: “The trend towards globalisation of financial markets, growing demand for more investment choices and the increasing importance of technology in enhancing service delivery are creating significant opportunities in investment management. In particular, these trends are fuelling the growth of the defined contribution market.”
Citistreet will principally focus on US and multinational clients before leveraging its DC administration activities into selected non-US markets.
The venture is also expected to achieve greater economies of scale and lower long-term unit costs for the groups’ existing recordkeeping and administration business platforms.
Under the terms of the joint venture agreement, State Street will contribute its Retirement Investment Services (RIS) business as well as Jacksonville-based Wellspring Resources, the company’s benefits administration business.
Citigroup will bring in defined contribution and retirement planning arm The Copeland Companies as part of the deal, to operate as a subsidiary of Citistreet. Copeland’s services include a one-on-one participant counselling service built around existing Citibank products.
The new company, which will be the third-largest record keeper in the US, is expected to begin operations in the first half of this year, administering around $200bn (e197bn) in assets and servicing more than four million plan participants.
James Phalen, executive vice-president of State Street and head of RIS, has been appointed Citistreet’s chairman and chief executive officer. Robert Dughi, founder of Copeland, will be president and a member of the Citistreet board.
Phalen says: “The new company also creates a dynamic strategic platform for enhancing penetration by Citigroup and State Street into all segments of the US market and selected international markets where the movement is away from government sponsored ‘pay-as-you-go’ retirement schemes and towards private, corporate-sponsored plans.” Hugh Wheelan

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