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State Street Research Eyes Retail Floating Rate Fund

17 Aug 2003

State Street Research & Management is considering bringing its floating-rate fund strategy to the retail level. The move is designed to protect investors against rising interest rates. State Street aims to capitalize on the solid track-record it has had with this offering on the institutional side, said Mark Marinella, chief investment officer, fixed-income. The Boston manager now offers the LIBOR Plus Strategy and Enhanced Cash portfolios to institutional clients. Indeed, many fixed-income managers are bracing themselves for the looming end of a long bond rally. A floating-rate strategy has been regarded as an effective hedge against rising interest rates, but only a handful of fund companies offer them directly to retail clients. In fact, there are almost no no-load shops who offer these types of investments, fixed-income managers said. "It's not that well known. You need someone, an advisor, to talk about it," said Payson Swaffield, v.p. and co-portfolio manager of the Eaton Vance Floating Rate Fund. Eaton Vance was among the first managers to peddle a floating-rate fund on the retail level. Swaffield said the fund has seen a year-to-date spike in assets, but declined to be more specific.

For State Street, the idea of introducing a floating rate fund to retail clients is a way to generate assets for its specialty products group, the $1 billion sub-division of its fixed-income practice, Marinella said. State Street sees the group as one of the growth engines of its fixed-income division.

17 Aug 2003