The world's sixth largest investment manager has teamed up with Bermuda Commercial Bank to unveil a new "weapon'' for small to medium captives.

Boston-headquartered investment manager State Street Global Advisors and the Bank launched the captive insurance programme yesterday in Bermuda, the world's largest captive market.

And BCB general manager of corporate treasury Barry Munholland said it would even the playing field for smaller captives so they could bolster their investment returns to match results often achieved only by larger captives.

The product is designed to provide captive insurance brokers and clients with access to a broad menu of cash, fixed income and equity investment strategies by "leveraging off the strengths'' of the two institutions.

It bundles together all the needs of captive managers on the Island to provide investment management, custody, levels of credit services, reporting and client service.

The investment mix can be custom-made to meet each captive's investment objectives and State Street would advise to help determine the ideal mix.

Summary and detail reports will be provided at least on a quarterly basis and portfolio experts would be on hand to make investment committee presentations and educational seminars.

Chiefs from both bodies said that depending on the success of the product in Bermuda, it would be carried to other jurisdictions.

Boston-based State Street Global Advisors principal Kevin O'Connor jetted into Bermuda for the launch and explained how the new partnership would provide fully customisable services to clients.

"We manage over $530 billion worldwide and we're delighted to have the opportunity to partner up with Bermuda Commercial Bank to introduce this programme,'' he said at the Royal Bermuda Yacht Club yesterday.

"It will enable the captive reinsurance market and captive reinsurance brokers to be much more effective in delivering services to their clients.

"Part of the strategy that we developed with BCB is to be able to give world class investment services offered by State Street Global Advisors and partnering up with BCB's local knowledge and client service.

"At the end of the day we expect to have a product that's going to deliver a very high degree of client service, very focused with meeting the need of the captive insurance market.

"It will also have an investment strategy that's going to be very flexible, very cost effective and also have performance characteristics that are going to be very competitive in the marketplace.'' The launch followed more than a year of analysis by both companies of the structure of the market place, consultation with captives, and investment experts.

Investment portfolios will be structured at fee levels competitive with traditional separate account and mutual fund investment products.

"The idea is to deliver a service more competitively priced relative to a mutual fund which is an expensive structure, but still offer the benefits of diversification,'' Mr. O'Connor said.

"With a separate account structure in the traditional way of investing it is a very costly and administratively cumbersome investment structure to use.'' Bermuda Commercial Bank boss Mr. Munholland said the target market were small to medium sized captives on the Island whose point of contact would be the bank.

"This is really a marriage of the convenience of having a local presence on the Island constantly in the form of BCB and a very large, well organised investment function behind us in the form of State Street,'' he explained.

He said the smaller captives were often at a disadvantage with their investment strategies but "doing the best they can, with what they have''.

"The larger captives tend to have their own capabilities for investment management, tend to make their own arrangements for custody services, letters of credit. They have the size to be able to do that.

"The small to medium sized clients usually find themselves at a disadvantage.

To try to split their small pool of assets over a wide array of liabilities puts them at a distinct disadvantage.

"Either they can't cover the liabilities, or they divide their asset pool into such small portions that they don't receive the return that they're looking for.

"This product addresses both of those questions and gives them a weapon which gives them the opportunity to spread their assets over their liability without giving up return.''