State Street to Buy Goldman Sachs Fund Administration Unit

State Street Corp. (STT), the third largest custody bank, has purchased Goldman Sachs Group Inc. (GS)’s hedge fund administration unit for $550 million in cash.

The deal makes State Street the largest servicer of hedge funds in the world with $877 billion under administration as of June 30, the Boston-based company said today in a statement.

The business of hedge-fund administration has been consolidating since the conviction of fraudster Bernard Madoff in 2008 spurred new regulation for hedge funds and companies that keep records for them. State Street added $170 billion of hedge-fund and private-equity assets when it bought Mourant International Finance Administration, based in Jersey in the Channel Islands, in December 2009.

Custody banks keep records, track performance and lend securities for institutional investors, including mutual funds, pension funds and hedge funds.

To contact the reporter on this story: Christopher Condon in Boston at ccondon4@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net