State Street, the money manager and mutual fund company, has become the latest victim of the collapse in the subprime mortgage market.

The company said it has set aside $279 million to cover legal costs expected from losses on investments tied to subprime mortgages. The charge creates a reserve of $618 million before taxes.

And its investment-management chief, William Hunt, has resigned. James Phalen was named the interim chief executive of the State Street Global Advisors unit, which manages about $2 trillion in assets.

"We have reviewed the actively managed fixed-income strategies at State Street Global Advisors that contained investments backed by subprime mortgages," said Ronald Logue, the company's chief executive. "Based on our review and discussions with certain customers who were invested in these strategies, we have established this reserve to address legal exposure and other costs relating to these strategies."

The company faces at least three lawsuits filed by clients who accused the firm of breaching its fiduciary responsibilities as a fund manager, Bloomberg News reports.