The Public School Retirement System of Missouri (PSRS) has accepted a $123 million out-of-court settlement with State Street Bank & Trust Company, which the pension had accused of violating its fiduciary and contractual obligations.
According to court documents, State Street agreed to manage and invest some of the assets of PSRS, and the Public Education Employee Retirement System of Missouri (PEERS). However, both retirement systems alleged that State Street violated multiple statutory and common-law duties while managing the systems’ assets.
The dispute dates back to 2008, when the board of trustees of the Missouri retirement systems began withdrawing funds from a State Street investment vehicle called the Quality D Fund, in which PSRS and PEERS had invested more than $7 billion.
Between October 2008 and May 2009, the board withdrew most of the retirement systems’ assets from the Quality D Fund. However, State Street claimed the withdrawal was wrongful, and in September 2009, ordered the board to transfer much of the withdrawn funds back into the Quality D Fund.
But the board refused to make the transfer, claiming that doing so would have resulted in a $125 million loss to the retirement systems. In response, State Street devalued the retirement systems’ remaining interest in the Quality D Fund, which the board said resulted in a loss of approximately $96 million to the retirement systems.
PSRS and PEERS terminated their custodial relationship with State Street in October 2010, and dropped its lawsuit on receipt of the $123 million payment.