SACRAMENTO, Calif. - State Street Corp. has won a contract to manage as much as $7 billion for the California State Teachers' Retirement System, taking a slice of business from Barclays Global Investors, the world's biggest index manager.

The Barclays Bank PLC unit has managed $38 billion, or about a third of the assets, held by Calstrs, the third-biggest U.S. public pension fund. Barclays, which oversees $800 billion of assets, will still manage between $7 billion and $10 billion of the fund.

Calstrs is still negotiating with the two firms. Sherry Reser, a spokeswomen for the Calstrs fund, said State Street Global Advisors will receive between $4 billion and $7 billion of the money that the Barclays unit currently oversees.

State Street, of Boston, was hired as the $113 billion fund added money managers to increase its leverage. "It's always good to have a comparative basis, so we decided to split it up," Ms. Reser said

State Street, which oversees $729 billion of assets, will manage the money in an account intended to mimic Morgan Stanley Capital International's EAFE Index, which tracks stocks in Europe, Australia, Asia, and the Far East.

The fund remains satisfied with the performance of Barclays Global Investors', which returned 16.5% in the fiscal year that ended June 30, beating the Morgan Stanley index by a percentage point, Ms. Reser said.

Tom Taggart, a spokesman for the Barclays unit, said that as part of the shift Calstrs will pay it higher fees for the money it will continue to manage. "They understand the value of this relationship," he said.

Ms. Reser declined to discuss fees, as did State Street and Barclays Global Investors.

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