Western Asset Management Co. is revamping some of its fixed-income strategies and trying to retain investment staff, as the once-hailed bond giant continues to face the fallout from its star trader Ken Leech being charged with criminal fraud.
The company is “fine-tuning” its bond strategies and plans to focus more on fundamental credit investing, Thomas Gahan, chief executive officer of Wamco, said in a note to investors. In 2024, its flagship fund was one of the market’s worst performers as the firm stuck to bets on interest rates and the economy.
“This recalibration of portfolio balance combined with a more tactical approach should give us more flexibility to navigate market volatility and generate more efficient returns while staying true to our investment philosophy,” Gahan said in the note on Wednesday and seen by Bloomberg News. “We expect to be more tactical in our positioning, particularly in macro-oriented themes like interest rates and currencies.”
A spokesperson for Wamco declined to comment.
Gahan said Wamco would soon begin integrating back- and middle- office functions with Franklin and its client team would begin also offering strategies from the broader Franklin company. He said the company has also put in place “significant compensation and retention packages” for staff.
The company, which managed about $272 billion as of Dec. 31 and is owned by Franklin Resources Inc., has been under siege since late August, when it revealed that the US Securities and Exchange Commission was investigating Leech, its then co-chief investment officer. The Department of Justice charged him in November with criminal fraud, alleging he “cherry-picked” winning trades for favored clients; he pleaded not guilty the following month.
Major institutional investors and retail clients yanked about $68 billion from Wamco in the final quarter of 2024, adding to a long stretch of outflows of money in recent years, particularly from flagship core bond portfolios. Employees have exited the firm, too, in recent months, including a team of emerging-market debt investors who went to Jackson Financial Inc.’s PPM America and Kurt Halvorson, now Senior Investment Officer, Fixed Income at NISA Investment Advisors.
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