Poor performance dooms Legg Mason's emerging-markets unit

Struggling money manager to close $500M in assets Esemplia.
AUG 19, 2013
Legg Mason Inc. (LM), the money manager seeking to reverse more than five years of net redemptions, will close an emerging-markets equity affiliate and return money to investors after weak performance. Esemplia Emerging Markets, which had about $500 million in assets and employed 25 people, will start winding down given its small size, according to an e-mailed statement from Mary Athridge, a spokeswoman for Baltimore-based Legg Mason. Legg Mason remains committed to building its international equity capabilities internally or through an acquisition, Athridge said. Legg Mason Chief Executive Officer Joseph A. Sullivan has vowed to stem withdrawals by focusing on Legg Mason's product lineup and improving performance. He said in an interview in June he wants to add a unit for non-U.S. equities that ideally offers both non-U.S. developed market and emerging-market stock funds. Sullivan said during a conference call last month that Legg Mason intends to review smaller units and that it agreed sell Private Capital Management, which manages equity portfolios for high-net-worth investors and institutions, to its management team. One of the funds run by Esemplia, the $101 million Legg Mason Emerging Markets Equity Fund, declined 4.1 percent over the past five years, trailing 86 percent of rivals and fell 6.3 percent over the past three years, behind 89 percent of peers, according to data compiled by Bloomberg. The $15 million Legg Mason Esemplia Emerging Markets Long-Short Fund (SMKAX) lost 2.9 percent over the past five years, falling behind 90 percent of similarly managed funds, and declined 5.3 percent over the past three years, trailing 93 percent of peers. Legg Mason has eight main investment affiliates, including bond unit Western Asset Management Co. and equity manager ClearBridge Investments, which operate independently with separate revenue-sharing agreements. The firm managed $644.5 billion in assets as of June 30. (Bloomberg News)

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