Western Asset Management Co., the $462 billion bond unit of Legg Mason (LM:US) Inc., said S. Kenneth Leech will become chief investment officer next year to succeed Stephen Walsh, who will retire.
Walsh and Leech, who have both been with the firm for more than 20 years, will share the CIO role until Walsh’s departure on March 31, 2014, Western’s Chief Executive Officer James Hirschmann said in a letter to clients today. Leech, 58, held the CIO role from 1998 to 2008. Walsh, 54, said in an interview he plans to spend more time on working for charitable causes when he retires.
Under Walsh, Western turned around performance following the 2008 financial crisis, with returns that rank among the industry’s best. Still, Western, like its Baltimore-based parent, has been struggling to reverse five years of customer redemptions. Legg Mason last month named Joseph A. Sullivan chief executive officer, ending a five-month search, as the firm seeks to stanch investor defections and revive its slumping share price.
“You never want to lose someone like Steve but our team is as good as ever,” Hirschmann said in a telephone interview from his office in Pasadena, California.
Western has had withdrawals of more than $200 billion since the end of 2007. Hirschmann said a portion of the money that left the firm was in low-yielding accounts, including money- market funds.
The $10.5 billion Western Asset Core Plus Bond Fund (WACPX:US), which trailed more than 80 percent of peers in 2007 and 2008, outperformed 97 percent of rivals over the past five years, according to data compiled by Bloomberg. The $3.4 billion Western Asset Core Bond Fund beat 95 percent of comparable funds over the same stretch.
“Their problems back in 2007 and 2008 may have left a bad taste in people’s mouths,” Geoff Bobroff, a consultant based in East Greenwich, Rhode Island, said in a telephone interview, explaining Western’s inability to attract more assets even as performance has improved.
Western, which is Legg Mason’s biggest investment affiliate, said last year it was removing the Legg Mason name from its U.S. mutual funds as part of a rebranding to increase sales to individual investors. The firm is also seeking more control of its fund sales, a person familiar with the matter said in November.
Walsh joined Western in 1991 and has served as the unit’s investment chief since 2008. Leech, 58, who joined Western in 1990, stepped down from the role of CIO in August 2008 and later took the role of chairman of the global strategy committee with oversight of the firm’s global bond portfolios. He was named Morningstar’s fixed-income manager of the year in 2004.
Western Asset accounts for about 70 percent of Legg Mason’s $661 billion in assets as of the end of February. Legg Mason’s funds under management have declined by one-third since swelling to a peak of $1 trillion in 2007.
Legg Mason’s stock (LM:US) is down more than 75 percent from its 2006 high. The shares advanced 24 percent through March 20, compared with the 18 percent gain in Standard & Poor’s index of asset managers and custody banks. The shares of money managers including New York-based BlackRock Inc. (BLK:US) and Baltimore-based T. Rowe Price Group Inc. have reached all-time highs this month.
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