We invest across alternative asset classes, including real estate, private equity, private credit, infrastructure, natural resources and hedge funds.
By investing across funds, co-investments and our own directly sourced deals, State Street Global Advisors brings the best of alternative investing to our clients.
With a select set of clients, our team customizes solutions to each client’s unique situation and needs. We can offer alternative investments as part of a total plan solution (see our OCIO capabilities), as a separate mandate for one or multiple alternative asset classes, or as part of a commingled offering to provide clients with diversified exposures at smaller commitment sizes.
Our team built its alternative investment skills as the in-house team for one of the world’s largest and most sophisticated pension plans. As such, we think like principals and understand the real-world complexities that plan sponsors face every day. Our investment capabilities are now being offered selectively to new partners.
Expertise Across Direct and Fund Investments
For more than 40 years, our team has been investing in directly sourced deals, manager-led co-investments and established third-party funds. Investing across all types of alternatives makes us better investors in each structure. Working with funds provides us insights into industry best practices that we can apply to our own deals. Co-investing alongside funds gives valuable insights into the general partner’s quality and approach.
Leveraging Our Operating Ecosystems
Relying on our distinct history, our team seeks to generate returns primarily through operational improvements. We have an in-depth ecosystem of operating executives to draw upon, spanning sectors from media to aviation to healthcare. From the managers who have led our direct deals and co-investments to our team members’ expansive professional networks, these relationships have helped enhance the value of our investments throughout the years.
Across the 40+ members of our alternatives investment team, we average more than 22 years of experience. Our teams have lived through numerous business cycles, and have experienced numerous successes and challenges. Through this hands-on hard work, we have built the sound judgment that is the bedrock of all investment decisions.
We strive to generate the best after-fee returns for our clients. Our long-term experience has taught us when to pay for specialists and when to execute directly, as well as how to collaborate effectively with operators, fund managers and deal teams.
The first step in designing any portfolio is to understand a plan’s requirements and current holdings. Building on the research that our team has done on alternative assets, we have developed a number of Strategic Portfolio Assessment (SPA) tools to analyze sponsor needs and the characteristics of portfolios.
*As of March 31, 2020
When investing in alternative assets, State Street integrates environmental, social and governance (ESG) considerations in order to mitigate risk and to seek outperformance benefits. Consistent with our firm’s overall commitment to ESG, our Alternatives team has instituted a formal process for evaluating ESG risks and opportunities, both pre- and post-investment. We actively leverage UN PRI questionnaires and guidance, SASB ESG relevant criteria, other external sources, and our own proprietary ESG considerations. Moreover, our program is not static. We continue to improve it as industry standards and techniques to extract and evaluate ESG data evolve.
We tailor our ESG process depending on the type of investment. The State Street Alternatives team invests across different asset types, from private equity to hedge funds and real estate, and across structures, from funds and co-investments to direct deals sourced by our team.
For funds, we assess the ESG policies and practices of our partners as a regular component of our investment teams’ research. In addition to investigating fund managers’ ESG policies, training and reporting standards, we will often go into depth on how managers incorporate ESG factors into individual investment decisions. In addition, we have a separate Operational Due Diligence team that provides additional evaluation of key governance factors.
For our direct real estate assets, ESG evaluations contribute to our goal of acquiring and managing diverse real estate properties that can achieve clients’ return objectives while minimizing risk. Before committing to assets, we undertake detailed due diligence that includes ESG considerations. Factors we regularly analyze include environmental condition, energy efficiency (e.g., LEED designation), walkability and transit orientation, on-site and local area amenities, tenant interviews, and operating partner background checks and anti-money laundering policies, among others. Once we own an asset, we will work with our partners and property managers to identify and implement cost-effective renovations that can both improve the quality of our assets and maximize returns for our clients.
Within our direct company stakes (private equity co-investments and direct deals), ESG analysis is an important contributor to our strategy of building diversified portfolios that achieve our clients’ return and risk objectives. Since we invest across industries, we tailor our ESG analysis to the most relevant considerations for each investment’s sector. For instance, we would focus on water management when looking at an energy investment, and on consumer privacy protections when analyzing an online media company.
By tailoring our ESG analysis to the specifics of each investment type, structure and industry, we are able to strengthen our overall investment analysis. Consideration of ESG factors helps us to both mitigate risk exposure and to enhance returns, and we will continue to improve our analysis in service of our clients’ investment goals.