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Legg Mason's annus horribilis Thursday, January 29, 2009

Image via WikipediaLegg Mason has experienced an awful year. In 12months

- Its' money market funds had to be significantly propped up to prevent them "breaking the buck"
- Star manager Bill Miller had a collapse in performance after 15 years of consistent out-performance, albeit many of those gains have now been wiped out
- assets under management have fallen to less than $700bn, 30% lower than a year ago
- it has just reported a $1.5bn loss for the last quarter to produce the worst results in 25 years

Unsurprisingly, its' shares has fallen by about 70% over the year.

Legg aren't alone in being battered by market conditions, but being one of the largest fund management firms makes the impact looks much larger.

You have to have some sympathy for Mark Fetting, Legg's Chief Executive. He only took over in January 2008, inheriting the reins from "Chip" Mason, who had led the firm for the previous 46 years, and who also stepped down as Chairman in December 2008 in favour of Fetting. Yet, as Napolean said, "give me lucky Generals" and Mason will be known as the successful Patriarch whilst Fetting will be the CEO who oversaw the downturn in the firm's fortunes. Indeed, if it was a movie script, you can imagine Chip being called out of retirement in 18 months time to "save the day and rescue the firm".

I've commented on Legg previously here, here, here, and here.

Labels: Bill Miller, Legg Mason, Money fund, Raymond A. Mason

posted by John Wilson @ 9:00 AM Permanent Link ,

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Legg Mason undone by money funds Thursday, October 30, 2008

Image via WikipediaHaving pumped $2bn into their money funds within the last 12 months, Legg Mason's share price fell 78% over the same period and in the last quarter its' assets under management have fallen by a further 9% to $842bn.

Aside from money market fund troubles, their former star equity chief Bill Miller who outperformed the market for 15 years from 1991 has seen big reversals in the last few years in his main fund, "Legg Mason Value Trust". Between Jan-Jun 2008 it fell by over 28% and its' 10 year performance to Jun 2008 was lower than the S&P500.

Legg Mason operates funds under a range of brands operated by semi-autonomous fund management subsidiaries that tend to specialise in particular asset classes e.g. Western focusses on fixed income.

The Legg Mason sales and distribution teams will have a considerable uphill struggle to maintain existing business, let alone secure new wins. Their saving grace may be their ability to push product from other brands in their stable that have performed better and which have not been "tainted" with the current problems.

Labels: Bill Miller, Legg Mason, Money fund, money funds

posted by John Wilson @ 4:01 PM Permanent Link ,

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Barclays Global Investors takes a hit on liquidity funds Thursday, August 07, 2008

Included in Barclays Bank results today was the news, highlighted by the FT, that profits before tax at Barclays Global Investors, the investment management business, fell 32 per cent to £265m, after charges of £196m, which the bank said were related to “selective support of liquidity products” to help clients.

This is a similar tale to that of firms like Legg Mason, who've wished to avoid "breaking the buck" on their money funds i.e. reporting a capital loss to investors. The support has normally taken the form of buying certain assets, usually illiquid ones, from the funds at above market value and absorbing the loss.

I've commented on this before here, here and here.

Will someone break ranks and admit that these are risky investments or will these funds continue to be "protected" by asset managers, in which case at what point will they be forced by regulators to capitalise accordingly?