The chief executive of State Street Global Advisors (SSgA), William Hunt, has resigned after State Street Corp. announced it would take a net after-tax charge of US$279 million in the fourth quarter.
The purpose of the charge is to establish a reserve to address legal exposure and other costs associated with the underperformance of certain active fixed-income strategies managed by SSgA and customer concerns as to whether the execution of these strategies was consistent with the customers’ investment intent.
As a consequence of the unprecedented events in the credit markets over the past six months, these strategies were adversely impacted by exposure to, and the lack of liquidity in, subprime mortgage markets.
“We have reviewed the actively managed fixed-income strategies at SSgA that contained investments backed by sub-prime mortgages,” says Ronald E. Logue, State Street’s chairman and CEO. “Based on our review and discussions with certain customers who were invested in these strategies, we have established this reserve to address legal exposure and other costs relating to these strategies.”
James S. Phalen, currently executive vice president and head of international operations for investment servicing and investment research and trading, is returning to SSgA will replace Hunt and serve as president and chief executive officer on an interim basis. The company has initiated a global search for SSgA’s new CEO, which will focus on both internal and external candidates.
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