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State Street to buy GE Asset Management for up to $485m

David L. Ryan/Globe Staff/file 2015/Globe Staff

State Street Corp. has been spending a lot of time cutting costs. Now it’s going to spend some money in a bid to boost profits.

The Boston-based custody bank and asset manager said Wednesday it agreed to acquire GE Asset Management, the pension arm of General Electric Co., for as much as $485 million in cash.

The deal will add $100 billion in assets to State Street’s investment unit, State Street Global Advisors. General Electric’s pension plan, covering 500,000 workers, accounts for roughly half the new money.

A spokesman for GE, an industrial giant that is moving its headquarters to Boston from Fairfield, Conn., said the company will deposit the net proceeds from the sale into its pension trust.

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For State Street, which manages $2 trillion in investments for pensions, endowments, and other large institutions, the deal is relatively small. But it adds more profitable, active management expertise at a time when the company is under pressure from Wall Street to boost its earnings.

The deal comes amid a period of prolonged cost-cutting and efforts to make State Street more digital. The company recently told investors it would shed up to 7,000 of its 32,000 jobs globally by 2020 and save $550 million in expenses. It has already announced hundreds of job cuts in the Boston area since the fall.

Jay Hooley, State Street’s chief executive, called the GE business “while not huge, very complementary to our strategy.” For instance, the group has active stock and bond management talent, as well as investors in real estate and private equity, he said.

State Street said it would keep GE Asset Management’s Stamford, Conn., office and its 275 employees, although overlapping functions could be pared in the future.

State Street said it would gain fee revenue of $270 million to $300 million in the first 12 months after the GE purchase, which is slated to close in the third quarter. Costs of integrating the companies will run $70 million to $80 million through 2018.

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Hooley, in an interview, described the changes State Street is looking to implement as a response to demand from its customers — mutual funds, pensions, and hedge funds — which want access to more electronic data that is well curated to help them manage money and control risk.

In addition to overseeing investments, State Street has a massive business handling accounting, recordkeeping, and other services on $28 trillion in assets on behalf of clients. New systems under development at the company are aimed at providing real-time data and analysis, Hooley said.

“We think we’ve got a leg up” on the competition, he said. “But now the next phase of that is to truly digitize our internal environment.”

In addition to rooting out thousands of faxes and manual trades that still come through the company, State Street rolled out for investors in February such changes as pricing securities for mutual fund clients as markets close around the world, rather than waiting to do it all after 4 p.m., when US markets close.

The company also predicted it could help actively managed mutual funds compete with exchange-traded funds by pricing every half hour, instead of only once, at the end of the day.

State Street shares rose less than 1 percent to $58.52 after trading as high as $59.90 earlier in the day.

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Half the major Wall Street analysts tracked by Bloomberg have a “hold” rating on the stock. One of those is Erik Oja of S&P Global Market Intelligence. In a research note, he said of the GE acquisition, “We see this deal as a positive” for State Street.


Beth Healy can be reached at beth.healy@globe.com. Follower her on Twitter @HealyBeth.