Legg Mason Inc. plans to eliminate 350 jobs to cut costs and buy back $1 billion in shares after suffering the biggest losses among publicly traded money managers during the credit crisis.
Legg Mason, based in Baltimore, said reducing payroll and moving certain technology functions to its investment affiliates will help save $130 million to $150 million by the fourth quarter of fiscal 2012. The firm said the measures will add 6 percent to 8 percent to its operating margin, which was 23 percent in the quarter.
Mark Fetting, Legg Mason’s chief executive officer, has sought to stanch fund outflows as investors adjust portfolios following the global financial crisis. Withdrawals fell to about $10.6 billion in the quarter from $32.7 billion in the three months ended Dec. 31, as customers pulled money from bond funds managed by its Western Asset Management unit.
Legg Mason reported its fourth straight quarterly profit as the Standard & Poor’s 500 Index rebounded from last year’s 12- year low and investors slowed the pace of redemptions. Profit for the fiscal fourth quarter ended March 31 was $63.6 million, or 39 cents a share, compared with a loss of $330 million, or $2.33, a year earlier, the firm said today in a statement. Fourteen analysts surveyed by Bloomberg expected the Baltimore- based asset manager to earn an average of 35 cents a share, excluding some costs.
“What most investors are focusing on is the flows, especially on the fixed-income side,” Michael Kim, an analyst with Sandler O’Neill & Partners LP in New York, said in an interview before results were announced. Kim expected Legg Mason to earn 37 cents a share.
Legg Mason’s bonds funds accounted for about 53 percent of the firm’s $684.5 billion under management as of March 31, according to the company. Equity funds made up about a quarter, while money funds represented the remainder.
Cash invested in structured
investment vehicles contributed to five straight quarters of losses at Legg Mason, a streak that ended in the quarter ended March 31, 2009, after the firm eliminated the mortgage-linked debt from its money-market funds.
Activist investor Nelson Peltz last year raised his stake in Legg Mason to become the largest shareholder in the company, and was named a director in October.
Performance at funds including those managed by Bill Miller improved last year, after slumping in 2008 because of investments in financial companies. Miller’s Opportunity Trust fund soared 83 percent in 2009, while his Value Trust climbed 41 percent, beating the 26 percent gain in the S&P 500, including dividends.
Legg Mason reported results after the close of regular U.S. trading. The shares have declined 0.7 percent this year, compared with 4 percent gain for the S&P 500.
