State Street Corporation (STT) announced the integration of Morgan Stanley Real Estate Investing’s (:MSREI) fund servicing business – the real estate investment management wing of Morgan Stanley (MS). This is a notable addition to the 40-year relationship between these two companies. Moreover, it boosted State Street's market-leading alternative and real estate fund servicing business. The integration process started in Feb 2012.
Roughly 150 employees of MSREI moved to State Street on completion of the integration. The company is offering wide-ranging accounting and administrative services across MSREI’s full range of investment offerings.
Management at Morgan Stanley believes that State Street’s leadership position in servicing alternative assets, combined with modern technologies and commitment to customer service, was a boon for MSREI.
State Street's Alternative Investment Solutions (:AIS) unit provides a wide-ranging suite of middle office, fund administration, risk analytics and credit services to hedge funds, private equity funds, real estate funds and institutional investors. The AIS division has more than 3,000 employees globally, and it managed roughly $1.1 trillion in alternative assets as of Dec 31, 2012.
Management states that the elevated operational and technology costs, complex fund structures, increased governance and transparency demands were the primary reasons for its alliance with Morgan Stanley in real estate fund management. The integration of MSREI’s fund servicing segment further reinforced State Street's AIS unit.
With the favorable trend towards private real estate investments, the outsourcing of real estate fund administration is anticipated to surge. Therefore, we believe that real estate investors will gain from the combined entity, which will support their long-term growth and expense management.
State Street currently carries a Zacks Rank #2 (Buy). Other major regional banks that are performing well include BankUnited, Inc. (BKU) and Fifth Third Bancorp (FITB), carrying Rank #1 (Strong Buy) and #2, respectively.
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