How to Fix Legg Mason

My favorite article from this week’s Barron’s is the turnaround-in-progress story on Legg Mason ($LM) by Beverly Goodman.  Goodman talks with Chip Mason, the now-retired founder as well as the current CEO Mark Fetting to find out what went wrong and how the firm is addressing the issues.

Bill Miller in better days

The Legg Mason saga is required understanding for anyone working in the investment business.  Essentially, it’s the story of a 1970’s regional broker-dealer that made big acquisitions in the asset management space and rode their in-house show pony Bill Miller (of Legg Mason Value Trust mutual fund fame) to a trillion in assets and a $136 share price by 2006.  Then Miller blows up his track record and fund between ’06 and ’08, the outflows start and the other affiliated investment management subsidiaries (Western Asset Management, Royce) begin to come unglued as well.

LM now sits at $26 a share, even with massive cost-cutting, layoffs and the presence of activist hall-of-famer Nelson Peltz in the stock.

Barron’s makes the case that what LM needs to truly turn around the firm is better returns and performance in its funds.  No duh.  Performance attracts assets and then, as Chip Mason wistfully relates, a lot of the problems start to take care of themselves.

But I think there are three other things Fetting (and Peltz) ought to consider:

1.  Buy Some Stars – With Bill Miller now retired from active management and his market-beating aura extinguished, it’s time to replenish the stables.  The reality is that Western and Royce are great brands with good reputations, but inflows follow stars, not brands.  Jeffrey Gundlach could have named his new firm Hellhole Capital Destruction Inc and made his corporate logo a f***in’ skull & crossbones and he still would’ve raised $20 billion out of the gates.  Because first, he performs and second, he’s a star.  John Hussman’s a star, too, even if he’s missed a great deal of the recovery rally.  He can still maintain fund flows as a result of his star power – the insights, the commentary, the historical record of missing the dot bombs etc.  LM needs some star power, not just good brand names.  Time to write some checks.

2.  Get Your ETF Game On – There are a handful of companies that build and operate actively-managed ETFs (AdvisorShares comes to mind as does First Trust.  Mr. Fetting I highly recommend you buy one of them out immediately and make the personnel and expertise the centerpiece of your comeback.  It’s time to take all those great niche Royce funds and turn them into active ETFs.  As more and more of the fund world’s distribution goes advisory, the broker-sold fund is simply a dead proposition.  Be bold, take the short-term hit on internal expense fees and ETF your top mutual funds.  Be a leader, Pimco did it and Pimco sees the writing on the wall just like you must.  You can take these to the advisor community and have a brand new story to tell about your storied franchises in a fresh, new wrapper. You will surprise and delight your existing fans and convert many new ones who would never look at a traditional mutual fund.

3,  Hire Thomas Brakke – My friend Tom could walk into Legg Mason on a Monday, meet with all of the relevant people and by Friday he’d have enough information to begin hammering out a real plan to turn around the investment management businesses – from process to personnel.  Most of you know Tom from his blog Research Puzzle, but you should also know that he runs a top-flight investment company consulting firm called TJB Research.  When Wall Street agreed to the $1 billion Global Settlement in 2003, Tom was brought in to one of the large wirehouses to rebuild their research apparatus so that it could be both useful and compliant with the terms of the agreement.  LM should get him on a plane to Baltimore this afternoon.

Anyway, these are my ideas, click over for the Barron’s piece or tell me yours below.

Read Also:

Can Legg Mason Bounce Back? (Barron’s)





This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.

What's been said:

Discussions found on the web
  1. Immediate Edge Review commented on Sep 22

    … [Trackback]

    […] Read More here to that Topic: […]

  2. reddit best cbd oil commented on Nov 27

    … [Trackback]

    […] Info to that Topic: […]

  3. braided wigs commented on Nov 28

    … [Trackback]

    […] Read More Info here on that Topic: […]

  4. daftar situs bola commented on Dec 20

    … [Trackback]

    […] Information on that Topic: […]

  5. nằm mơ thấy ốc đánh con gì commented on Dec 23

    … [Trackback]

    […] Here you will find 51082 more Information on that Topic: […]

  6. Lexmark C734A4YG manuals commented on Jan 21

    … [Trackback]

    […] Read More on on that Topic: […]

  7. Zanussi ZCE7700X manuals commented on Jan 24

    … [Trackback]

    […] Read More here on that Topic: […]