February 8, 2008

The Long and Short of It

State Street launches 130/30 fund

To satisfy what it says is demand from advisors and other intermediaries, State Street Global Advisors, the investment management arm of State Street Corp., recently launched the SSgA Core Equity Fund, a mutual fund that takes both long and short stock positions, which is known as a 130/30 fund.

State Street says the SSgA Core Edge Equity Fund will invest its assets, including proceeds received from short sales of securities, primarily in large and mid-cap securities; the underlying valuation or business fundamentals of which indicates prospects for growth. "The equities that the fund owns should equal as much as 130% of the fund's net asset value at any given time," State Street said in a release announcing the launch of the fund. "The fund plans to short sell the securities of companies with apparent deteriorating business fundamentals and/or valuations. The replacement cost of all securities sold short should equal approximately 30% of the fund's net asset value at any time."

Anthony Rochte, senior managing director at State Street Global Advisors, said in the release that since the launch of State Street's first Edge strategy, "We've seen significant interest for access to long-short strategies, as intermediaries and advisors have increasingly demanded a bridge between moderate risk/moderate value-added long-only strategies and higher-risk hedge funds as a way to generate higher returns." James Ross, senior managing director at State Street Global Advisors, added that "By removing the long-only constraint from the stock selection process, the Core Edge Equity Fund is designed to provide an increase in expected returns with a risk level that is moderately higher than that of the S&P 500 Index."

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