Legg Mason?s agreement to expand the sale of its funds outside Citigroup Inc.?s Smith Barney brokerage should provide the Baltimore asset manager greater flexibility to market its services.
Baltimore-based Legg Mason, the second-largest traded U.S. money manager, conducted an asset swap with Citigroup two years ago in which Citigroup took on Legg Mason?s brokerage and capital markets units and Legg Mason received Citigroup?s asset-management business and preferred access to Citigroup brokers.
The new agreement allows Legg Mason to sell share classes of funds through brokerages and outlets it chooses. Legg Mason had been restricted to selling them exclusively though Citigroup?s Smith Barney brokerage.
“Under the modified arrangement, Smith Barney will continue to have exclusive rights for Legg Mason Capital Management funds in primary share brokerage arrangements,” Legg Mason spokeswoman Mary Athridge said.
“At the same time, Legg Mason Capital Management will have the opportunity to make its funds more broadly available through firms and platforms that serve investors though fee-based arrangement,” Athridge added.
Andrew Richards, a Legg Mason analyst for Morningstar, a Chicago-based research firm, last week said both Legg Mason and Citigroup were rumored to have been dissatisfied with the previous agreement.
“Legg?s equity performance lagged, and Legg saw substantial redemptions from the Citi network,” Richards wrote in a report after the new agreement was announced.
Shares of Legg Mason ended last week trading about 13 percent lower than at the beginning of the year.
“We feel this new agreement is good for Legg, as it allows greater flexibility to market its products and sell them without being dependent upon a single channel,” Richards wrote.
Legg Mason, with $992 billion in assets under management around the world, totaled net income of $191 million in the first quarter of fiscal 2008, up 22 percent from the first quarter of 2007.
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
Name Purchase Price Close Sept. 21 Change %Change
Black & Decker $79.90 $84.31 $4.41 5.5
Constellation $68.70 $88.59 $19.89 29
Found. Coal $31.75 $38.54 $6.79 21.4
Legg Mason $95.00 $81.99 ($13.01) -13.7
Lockheed Martin $91.60 $103.20 $11.60 12.7
McCormick & Co. $38.52 $36.71 ($1.81) -4.7
PNC Fin. Serv. $75.15 $70.26 ($4.89) 6.5
Sinclair Broad. $10.50 $13.07 $2.57 24.5
T. Rowe Price $43.75 $53.87 $10.12 23.1
W.R. Grace $19.80 $27.08 $7.28 36.8*
*TRADING NOTE: The price of W.R. Grace shares increased from $25.89 to $27.51 during heavy trading Friday.
