In a move that was a step back to the future for Federated Investors, the Pittsburgh firm said it would turn over its mutual fund accounting, financial administration, and reporting to State Street Corp.

State Street had worked in various capacities for Federated since the 1950s and performed mutual fund services until 1993, when Federated decided to take on the functions in-house. State Street continued to act as Federated's custodian.

Getting the Federated account back again is a major coup for State Street's mutual fund servicing group.

Federated manages $130 billion of assets, primarily for bank trust departments.

In this latest change, announced Wednesday, Federated retains oversight for the operations through Federated Services Co., its customer service and technology group. As many as 230 employees of that unit can continue in their jobs if they accept offers to join Boston-based State Street.

Federated has decided to "focus more on investment management and asset gathering," said Alan D. Greene, senior vice president for mutual fund services at State Street. "They have hired us to take over the fund accounting, reporting, and administration."

Mr. Greene declined to say how much Federated will pay for the services, but said, "$130 billion is the largest win for us in the mutual fund business ever."

State Street has $3.8 trillion in custody for registered investment advisers and other investment managers, and it performs fund services for $2 trillion of that. After Federated, its biggest mutual fund clients have about $100 billion each, Mr. Greene said.

The shift in Federated's strategy reflects State Street's increased prowess in fund services and Federated's decision to focus on managing money, sales and distribution, and customer contact.

"We felt we could go to the market with this service as a stand-alone service and compete with the likes of State Street," said Arthur L. Cherry, president of Federated Services Co. "Today, we view this as a continuum of multiple services coming together, not individual services."

Federated manages assets for more than a million investors through 100,000 financial intermediaries, including trust departments.

Mr. Cherry said Federated retains ultimate responsibility to clients for the timeliness and accuracy of financial statements, while logistics such as entering trades are covered by State Street.

"We're not shifting any responsibility to anyone," he said. We're aligning with the skilled expertise, knowledge and experience of State Street."

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