STATE  STREET GLOBAL ADVISORS
$23.06bn in Asia (ex-Japan) equities

Flagship product:

SSgA Asia Alpha Strategy

Investment and risk management process:

A quantitative process supplemented by fundamental analysis to identify and exploit mispricings. The four-step process entails:

1. Ranking countries and building a country portfolio.
2.  Ranking stocks and constructing a stock portfolio within each country.
3.  Using selective currency hedging to control risks.
4.  Constructing portfolio with the best vehicles and adding value through trading skills.

Risks are defined as tracking error relative to the benchmark, but absolute volatility of stocks and countries are also examined. The risk model permits multiple and simultaneous risk penalties and implies that, as industry, country and capitalisation deviations from the benchmark become greater and greater, the incremental expected return from a stock must increase in order to compensate for the greater benchmark relative risk. Country, sector, industry, and security-specific bands relative to the benchmark are also imposed.

Future trends

SSgA sees more focus put on corporate governance. Many Asian countries have implemented corporate governance codes and corporate law reforms in the past few years. Although we cannot expect that corporate value destroying activities will stop at once, we do expect that companies with shareholder friendly management will perform better over time than those with poor corporate governance.