Prompted by demand from institutional and other clients, State Street Global Advisors (SSGA) are extending their investment activities into direct equity investment and other alternative asset classes.
In the first of what a company spokesman said should be a series of similar moves in 1997 and beyond, SSGA have announced a joint venture with a Prague-based company to provide direct equity investment in European emerging markets.
SSGA will have a 60% controlling stake in European Direct Capital Management, a venture with Emerging Europe Asset Management (EEAM).
SSGA chairman Nicholas Lopardo explained: This is a major step in developing investment expertise in the alternative asset classes that appeal to a rapidly growing number of pension funds and other experienced investors looking to diversify their portfolios.” In addition to direct equity, the venture may also develop strategies for other asset classes.
The company has plans for more projects. “There will be other projects in Europe and in other parts of the world using other types of vehicles in addition to limited partnerships and direct investment,” a spokesman said.
The umbrella organisation for the new strategy will be a new SSGA unit known as SSGA Global Alliance, headed by John Snow, whose role will be as overall strategist.
The spokesman added: “Over the past few months, we have brought in people like John Snow, who have valuable knowledge and experience geographically and about new product types.
“If they can identify a way or a means or a collection of people that seem to represent opportunity then they will do it. It’s an attitudinal thing. We are looking for new ideas, news ways, new people and new vehicles.”
SSGA’s venture, EEAM has substantial emerging markets investment expertise. The company uses a bottom up approach to identify undervalued companies in markets such as the Czech Republic, Poland, Hungary, Slovakia and Russia.
Nigel Williams, chairman of EEAM, said: “Europe’s emerging markets differ from those in other parts of the world because they are the consequence of ownership and company restructuring rather than as a result of industrialisation. The transfer of assets to the private sector is creating a rare opportunity to own companies in the years ahead. Shorter term, the European emerging markets have the potential to see higher rates of economic growth, low company valuations and higher debt yields than in mature markets worldwide.”