Changes could be in order.
Following Citigroup?s announcement last week that it failed to reach forecasts for the sale of Legg Mason?s mutual funds, a potential renegotiation of the deal that brought the two businesses together could be in order. In a deal agreed to about 18 months ago, Legg Mason contracted Citigroup to distribute its funds through its Smith Barney brokerage arm.
Analysts, however, say the limited sales might merely be a bump in the road.
“I certainly don?t think it has a cataclysmic impact on the fund of the business, but I would call it a lost opportunity if they couldn?t stimulate significant demand through that channel,” said Jeffrey Ptak, an analyst covering Legg Mason for Morningstar. “It?s a sizable channel, so for them not to do their best to distribute the product is a disappointment. But by the same token, there is a light at the end of the tunnel.”
From Legg?s perspective, the relationship is still developing with Citigroup to help market a substantial portion of its $150 billion in retail mutual funds. “Citigroup/Smith Barney is a key distribution partner,” a spokeswoman for Legg Mason said. “As you would expect, we are working closely with them to promote a long-term relationship that meets each of our objectives.” For the first six months of 2007, Legg had inflows of about $670 million, a substantial downturn from the more than $2.5 billion recorded during the same time last year, the Financial Research Corp. reported. During the last year, Legg shares dropped by a third.
“The weightier problem is investment performance,” Ptak said. “If they can get that piece right, it makes it that much easier to get distributors warm to the product and sell them.” Legg Mason is part of The Examiner Top 10, a portfolio of some of the largest publicly traded companies in the Baltimore region.
The Financial Times contributed to this story.
EXAMINER TOP 10
The Examiner Top 10 portfolio began Jan. 3, the first trading day of the year, with the hypothetical purchase of one share in each company.
Friday?s Closings
NamePurchase PriceClose Aug. 3ChangePercent changeBlack & Decker $79.90$87.70+$7.809.8Constellation Energy$68.70$82.50+$13.8020.1Foundation Coal$31.75$32.47+$0.720.02Laureate Education$48.60$61.55+$12.9526.6Legg Mason$95.00$86.20-$8.80-9.3McCormick & Co.$38.52$34.85-$3.67-9.5Fin. Serv.$75.15$64.09-$11.06-14.7*Sinclair Broadcast$10.50$12.07+$1.5715T. Rowe Price Group$43.75$48.39+$4.6410.6W.R. Grace
$19.80
$20.03+$0.230.01TRADING NOTE: On Friday, Aug. 3, shares of PNC Financial Services hit a 52- week low, trading at $64.06 per share.
