Capabilities
SSgA's Index Equity strategies seek to match the performance and characteristics of a benchmark for a specific domestic or global equity market. We continually review and assess the tradeoffs and relative advantages or disadvantages between transaction costs and tracking error, with the objective of achieving a balance between the two, while at the same time remaining mindful of the ultimate goal: maximizing client wealth in a risk-managed environment. This approach seeks to minimize portfolio turnover and transaction costs.

Our Process
The objective of this passive equity process is to remain fully invested in the appropriate equity markets at all times. Our strategy is to buy and hold qualified securities, trading only when there are participant cash flows, a change to the index, or to reinvest cash from dividend income, tax reclaims or corporate actions.

We manage every Index Equity portfolio with three basic objectives: broad-based equity exposure; predictable variance around a relevant benchmark; and exposure at low cost. We vigilantly monitor the balance between inherent transaction costs and the portfolio's tracking error against the backdrop of seeking to maintain a comprehensive and diversified portfolio. This is intended to yield a sound balance between maintaining a properly indexed portfolio, while simultaneously aiming to increase our clients' portfolio results.

SSgA implements its Index Equity strategies by means of a continuum of appropriate indexing methodologies. At one end of this spectrum are our highly sampled, optimized portfolios. At the other end are portfolios that more closely reflect the benchmark composition and carry less tolerance for security-level misweight.

Our Solutions
SSgA seeks to provide solutions that can meet almost any client need, no matter how complex or unique. We offer experience, breadth and flexibility for institutional investors seeking efficient exposure to indexed world equity markets. Whether the strategy called for is US index equity, global indexing, developed markets indexing, emerging markets indexing, a specific country mandate, or even a frontier markets strategy, we can customize a strategy to match a client's specific needs.

New Product Development
At SSgA, we continually research ways to utilize the advantages of index management. We are at the forefront of some of the newest trends in indexation, including:

The rapid growth of the hedge fund industry in recent years has attracted institutional investors in search of alpha and diversification in their portfolios. However, research has shown1 that a significant portion of hedge fund returns come from traditional, alternative, and exotic betas.

Value weighted indexing provides an alternative to traditional capitalization-focused strategies. This approach looks at all securities in an index from a fundamental analysis perspective, as opposed to grouping stocks by their market capitalizations. This method seeks to weight stocks by their fundamental characteristics such as book value or dividend yield and those stocks with low price to fundamentals are given more weight. Fundamental indexing seeks to provide broad diversification, low turnover, low cost, and transparency.

Our People
We have a dedicated team of portfolio managers around the world, experienced in all aspects of transacting and managing a wide variety of global index portfolios. Portfolio managers typically have more than a decade of hands-on industry experience, and hold an MBA degree and/or CFA designation.

The Results
The advantages of SSgA Index Equity solutions are reflected by our core strengths: experience, breadth, flexibility, internal liquidity, and size. Our decades of experience in providing solutions were earned through performing in a variety of market environments. We provide a product breadth and depth that makes us one of the industry leaders, with a large selection of implementation options that track almost any benchmark. We strive to provide the flexibility necessary to accommodate the complex objectives of a unique yet diverse clientele. Our size means an economy of scale and access to resources of the State Street family that have earned us the rank of one of the largest managers of index assets.

¹ William K.H. Fung and David A. Hsieh, "Hedge Funds: An Industry in Its Adolescence", Economic Review, Federal Reserve Bank of Atlanta, Q4 2008.