Western Asset names new CEO after SEC probe, outflows besiege fund firm

Western Asset Management Co. named Thomas Gahan chief executive officer in a leadership shakeup following more than $50 billion of redemptions and US government allegations that once-star manager Ken Leech engaged in a three-year fraud. 

Gahan, founder and chairman of parent company Franklin Resources Inc.’s Benefit Street Partners, succeeds James W. Hirschmann III as CEO, Western Asset said in a statement Tuesday. Hirschmann — who was president and CEO for more than two decades — will assume a new role as chairman, the company said.

“As chairman, I’ll be focused on deepening client relationships across the globe and helping ensure a smooth transition for Tom, setting him up for maximum success during a dynamic time in the markets and for our clients,” Hirschmann, 64, wrote in a letter to clients and investors Tuesday. 

Wamco has been a giant of the bond market for decades, at times rivaling Pacific Investment Management Co. and BlackRock Inc. As of Oct. 31, Wamco managed $336.1 billion of assets. 

Investors have yanked billions of dollars from Wamco this year after the firm disclosed parallel investigations from the US Department of Justice and the Securities and Exchange Commission into whether Leech cherry-picked which customers got more-profitable trades. 

Last week, both agencies formally accused Leech, Wamco’s former co-chief investment officer, of routinely waiting and assigning profitable trades to accounts that generated the most revenue.

Gahan, 62, has spent the past 35 years working in fixed income, alternatives and other asset classes, and he has had executive leadership positions. He’ll continue to serve as chairman of Benefit Street Partners, which has more than $75 billion of assets under management.