State Street Boston Corp. has set up a joint venture with a Prague- based asset manager to offer its clients investments in emerging European countries.

The venture, dubbed European Direct Capital Management, will invest in the Czech, Polish, Hungarian, Slovakian, and Russian equity markets. It will initially offer private placements to institutional investors and wealthy individuals; separately managed accounts and mutual funds could be made available later.

"Our desire is to be able to provide a more complex range of investment strategies for our varied clients worldwide," said John R. Snow, managing director of a new State Street unit, SSgA Global Alliance. European Direct is the first entity created under the unit's aegis.

State Street already runs a substantial international money management business, including $6 billion under management in emerging-market strategies. It manages about $60 billion outside the United States, but its staff presence in Europe had been limited to cities in the western part of the continent. European Direct puts State Street on the ground in eastern Europe.

State Street's partner in European Direct is Emerging Europe Asset Management, founded last year by its chairman, Nigel Williams. Through a joint venture with Austria's Creditanstalt Group, Mr. Williams and his partners launched a $100 million central European equity fund that is now listed on the London Stock Exchange.

State Street Global, which manages a total of $292 billion of client assets, owns 60% of European Direct and will appoint the majority of its board members. Further terms of the deal were not disclosed.

"You'll see more joint ventures of this nature because they provide quick access to a market by leveraging the expertise of a local manager," said Robert Krizner, a partner in KPMG Peat Marwick's financial services practice.

While many U.S. banking companies express interest in offering international investments, few have created joint ventures or alliances for that purpose. Fewer still have any presence in eastern or central Europe.

Mr. Snow said he sees increasing demand for emerging markets investments due to the success of U.S. stocks. Institutional investors have reaped large gains domestically, so they have more assets available to invest elsewhere. He added that countries such as Poland and the Czech Republic are likely to offer strong returns as companies once controlled by the government look for public capital.

"It's a little different from investing in emerging markets such as Latin America or Asia where we are participating in the beginning of industrialization," Mr. Snow said. Poland and the Czech Republic "are industrialized nations that have been out of the loop for 50 years and they're coming back in."

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