State Street has said it will buy Goldman Sachs Group's hedge fund administrator for $550 million (€447 million) in cash.

State Street said the acquisition, which does not include Goldman's prime brokerage business, is expected to add to earnings in its first full year of operations on a cash basis.

Hedge fund administrators provide back-office services such as portfolio valuation and risk assessment for the $2 trillion industry.

Growing demand from regulators for an independent assessment of funds has increased hedge funds' use of these administrators, leading to a number of deals in the sector.

The acquisition is expected to be finalised in the fourth quarter and all GSAS's employees, including its management, are expected to join State Street.

GSAS administers about $200 billion in single-manager hedge fund assets on behalf of 150 clients.

Shares of State Street closed at $44.14 yesterday on the New York Stock Exchange. Goldman Sachs closed at $97.68.

Reuters