Legg Mason breaks streak, finally ends net outflows

Money manager stanches bleeding over last 20 quarters; profits up as well in Q2

Oct 26, 2012 @ 11:45 am

By Jason Kephart

Legg Mason Inc.'s streak of 20 consecutive quarters of net outflows is finally over — thanks to risk-averse investors.

Legg Mason's money market funds had $9.7 billion of inflows during the third quarter (the company's fiscal second quarter), which just outpaced the $9.5 billion in outflows from its equity and fixed-income mutual funds. It was the first time the company's inflows have exceeded outflows since 2007.

The hemorrhaging over the past five years led to Mark Fetting's stepping down as chief executive this past September. Legg Mason is still searching for a new CEO. The new boss will have to decide whether to continue the firm's affiliate model.

Legg Mason is the parent company to Legg Mason Capital Management, Western Asset Management Co., Royce & Associates LLC and ClearBridge Advisors LLC. Spinning off one or more of the affiliates is a possibility, according to analysts.

But the company is committed to the affiliate model, interim CEO Joseph Sullivan said during a webcast announcing the company's latest earnings report Friday.

Activist shareholder Nelson Peltz — and not Mr. Sullivan — likely will have the biggest say in the direction the company takes. Mr. Peltz currently owns 10% of Legg Mason shares, a threshold he agreed not to exceed until mid-November. With that agreement nearing an end, all bets are off. Thus far, Mr. Peltz has been silent about his intentions.

Last year, he did point to Western Asset, Legg's fixed-income arm, which accounts for 57% of the company's assets under management, as being the key to a turnaround.

Western Asset stumbled during the financial crash, however, and has missed out on the three-year bond fund buying bonanza.

Performance at the asset manager has turned around, though. Its Core Bond Fund Ticker:(WATFX) ranks in the top 10% of all intermediate-term-bond funds over the past three years, according to Morningstar Inc. Flows haven't yet responded. During the past quarter, investors withdrew $3.8 billion in fixed-income assets, according to the company.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

Why some retirement plan advisers think Fidelity is invading their turf

InvestmentNews editor Frederick P. Gabriel Jr. and reporter Greg Iacurci talk about this week's cover story that looks at whether Fidelity Investments is stepping on the toes of retirement plan advisers.

Latest news & opinion

Broker protocol: Indecision over recruiting agreement is rampant

Ruckus over recruiting agreement has even wirehouse lifers wondering if it's time

Cetera reportedly exploring $1.5 billion sale

The company confirmed it's talking to investment bankers to 'explore how to best optimize [its] capital structure at lower costs.'

SEC Chairman Jay Clayton outlines goals for a new fiduciary standard

Rule should provide clarity on role of adviser, enhanced investor protection and regulatory coordination.

Advisers bemoan LPL's technology platform change

Those in a private LinkedIn chat room were sounding off about fears the independent broker-dealer will require a move to ClientWorks before it is fully ready.

Speculation mounts on whether others will follow UBS' latest move to prevent brokers from leaving

UBS brokers must sign a 12-month non-solicit agreement if they want their 2017 bonuses.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print