STRUCTURED PRODUCTS | Tim Charlton, Singapore

Legg Mason brings multiple brands to clients

Legg Mason is making concrete moves worldwide and particularly in Asia. Tim Charlton speaks to Lennie Lim, Managing Director, Legg Mason Investments, to understand the operations and challenges faced by the investment house.

Q. What are your strategies in terms of distribution and what companies do you work with?
To answer your question, you have to understand Legg Mason. Legg Mason is very unique in the sense that it has a collection of wholly-owned investment managers. Legg Mason houses more than 10 investment affiliates and most of them are recognized as being best in class specialist in their own area of expertise.

When Legg Mason acquires a firm, we recognise that it is very important to maintain their culture, for them to retain their investment process and investment autonomy. Legg Mason’s network of managers includes Permal and Western Asset Management.

Permal is one of the largest hedge fund managers and Western Asset Management is among the top fixed income managers in the world and has over US$632 billion in assets under management (March 31, 2008). We have already launched Legg Mason Capital Management in Asia and are planning on introducing more of our investment affiliates to our distribution partners this year.

Some of our other investment affiliates are Royce & Associates which follow a disciplined value approach in small and micro cap US equities.

ClearBridge Advisors, which focus exclusively on managing US equities. We also represent Batterymarch which manage equities through the use of a mixture of quantitative models and qualitative fundamentals. They are a pioneer in quantitative analysis for equity management with expertise in UK, US, Europe and Asia since 1969.

A number of our managers have enjoyed external recognition for their performance excellence. A few weeks back three of our affiliates collected awards from your local competitor, Asian Investor.

Batterymarch won in the Pacific Equity category, Brandywine Global for their global opportunities bond fund and Legg Mason International Equities from our HK office for HK equities.

As you can see we operate under different brands of our investment affiliates, clearly because it is to our best advantage.

Q. Is that difficult, selling different brands to customers?
Yes, it can be challenging. That is why I am very focused on working closely with our key distribution partners. Providing a high level of client service is of upmost importance to Legg Mason Investments. We nurture our key relationships and ensure that they are kept well informed about our various investment affiliates and their product capabilities.

Q. Can you do better than your competitors because you have multiple brands?
I can not answer that, but there are aspects of our business where we add a lot of value to our clients in ways that our competitors can not match. We add value by offering our distribution partners an extensive network of experienced and diversified investment managers. This is of course more challenging on the retail front where there is a greater focus on a single brand. That is why we aim to partner with retail banks that have strong relationships with their clients and are focused on long-term investment capabilities of the investment managers. Private Banks on the other hand are more focused on fund performance and bringing best of breed investment products with multiple brands is a strong point of differentiation – which is clearly our advantage. So that is why we don’t feel it’s necessary to have our brand advertised on the back of a bus to be well recognized by our clients.

Q. How much of your sales are to the private banking channel and how much is to institutional investor channel?
Our base with Private Banks is very substantial and our FoF and Insurance businesses are strong contributors to our numbers. Institutions that wish to invest directly into funds also form a large portion of our business.

Q. Where would you like to be?
We have a very strong foothold among the insurance clients and at the same time we have good relationships with large local distribution banks in Singapore.

I want to see these existing client relationships grow and deepen. I am very pleased with the model here and am working with my team on emulating this approach in our other LMI offices in Asia.

Q. Which funds are licensed to be sold through consumer banks in Singapore?
We have a broad offering in Singapore. For sophisticated investors who typically have a wide range of investment requirements we offer over 35 funds across multiple investment affiliates, investment classes and styles. For retail investors we offer over 14 funds which have been tailored to meet the demands of local investors. For example, we offer SGD denominated funds that cater to customers with both a conservative or aggressive risk appetite and investment time horizon.

Q. What is in demand right now from your product range?
We work to our strengths. Legg Mason’s strength is in core asset classes. Providing long-term investment solutions in core portfolios is how Legg Mason has built its business to almost a trillion dollars in assets under management. We are the 9th largest asset management firm in the world with over 100 years of history.

Legg Mason is singularly focused on money management and we excel in providing investment solutions in core asset classes. In particular, we have strong fixed income capabilities and a number of our distribution partners across the region are keen on funds from Western Asset Management. We are also strong in US and Asian equities. For example, Patrick Tan of Legg Mason International Equities (Singapore) is a renowned fund manager in Asian equities in Singapore. And of course, we have Bill Miller – our “Giant of Wall Street”.

Q. Which are the funds in demand? Which are the best of your core funds?
Right now we see that the market is really cheap for US equities. If you have a 3-5 year time frame, now is really the time to build a position in US equities. From the Asian side, a lot of people in Asia believe in the region. Local and regional investors can see that even though there is vulnerability in Asia, they still believe in the Asian growth story.

Our Asia focused funds from Batterymarch and Legg Mason International Equities in Hong Kong and Singapore have performed well. Funds from these investment affiliates have strong long-term investment track records and can serve as either an entry point into Asian markets or as an enhancement to a customer’s core Asia-based portfolio.

Q. What are you excited about? What about commodities? What core equity funds?
No, I think commodities are “an over crowded trade”. I am personally putting my money in US equities - in the Legg Mason Value Fund. That fund is run by Bill Miller. He has a 25 year track record and is the only manager to have beaten the S&P index for 15 consecutive years – which demonstrates to me that he has the skills necessary to weather through various investment cycles.

Q. Are any of your brands activist investors?
A significant portion of our investment products and services across multiple managers are socially screened across a range of environmental, social and governance variables - but I am hesitant to label our managers as “activist” investors. From Legg Mason’s corporate perspective, we engage in some initiatives that support environmental, social and governance issues. For instance, Legg Mason is a signatory and member of the Carbon Disclosure Project (CDP), one of the most significant global initiatives to address climate change. Our new corporate headquarters in Baltimore is pre-certified as a Silver LEED (Leadership in Energy and Environmental Design) facility. LEED is the recognised U.S. standard for environmentally responsible buildings.

Q. How would you describe your position in the private banking business? Where would you add value to the portfolio choices of private banks vis-à-vis other funds distributors?
It all boils down to providing Private Banks with the best of the breed in investment choice. Our network of investment affiliates by design offers Private Banks diversity and access to some of the most highly regarded independent managers with strong long-term investment track records.

Our managers are specialised in specific asset classes and that’s where they eat, live and breathe by that asset class. At the end of the day, I find my job to be extremely interesting as I have the privilige of offering these “best of the breed” managers to my key distribution partners in Asia.

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