State Street investigated in bond fund improprieties
Massachusetts Secretary of the Commonwealth William Galvin is investigating claims that State Street Corp. misled clients about the risk associated with one of its bond funds.
Massachusetts Secretary of the Commonwealth William Galvin is investigating claims that State Street Corp. misled clients about the risk associated with one of its bond funds.
“There is an ongoing investigation,” said Brian McNiff, a spokesman for Mr. Galvin’s office. “It has been going on for a while.”
According to a report in the Wall Street Journal, Mr. Galvin is investigating claims that the Boston-based investment firm did not inform clients about the level of risk involved in the State Street Limited Duration Bond Fund.
“State Street will not comment specifically on the investigation,” said Arlene Roberts, a spokeswoman for the firm. “State Street established a reserve to address claims about the bond fund.”
The fund was among several fixed-income strategies managed by its investment unit, State Street Global Advisors, which lost money due to exposure to the subprime mortgage market.
Several lawsuits were filed against State Street Global Advisors more than a year ago over losses in bond strategies.
In January 2008, State Street announced it had established a reserve fund to address legal exposure and other costs associated with the underperformance of the fixed-income funds.
State Street had $1. 4 trillion in assets under management as of March 31.
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