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Western Asset Said to Seek More Control of Distribution

November 02, 2012

Western Asset Management Co., the fixed-income affiliate of money manager Legg Mason Inc. (LM:US), is seeking more control of its fund sales, according to a person familiar with the matter.

Western Asset, which manages $459.7 billion, is trying to negotiate a move away from the centralized distribution model in which sales of retail products go through its parent company, said the person, who asked not to be identified because they’re private. The unit won’t seek a spinoff from Legg Mason if the talks aren’t successful, the person said.

The bond unit is seeking to bolster its brand and control sales as Legg Mason reviews the relationship with affiliates following the departure of Chief Executive Officer Mark Fetting, who oversaw client redemptions of $135 billion during his tenure. Joseph A. Sullivan, the former head of distribution at Baltimore-based Legg Mason who took over as interim CEO, is more open to the idea of altering distribution, according to another person familiar with the matter.

Sullivan declined to comment. Maria Rosati, a spokeswoman for Legg Mason, declined to comment on Western Asset’s distribution model.

Western Asset, the Pasadena, California-based unit that accounts for 71 percent of the parent company’s assets, said in May it was removing the Legg Mason name from its U.S. mutual funds as part of a rebranding to make the funds more competitive and increase sales to individual investors. ClearBridge Advisors, Legg Mason’s largest stock-fund affiliate, said last month it was dropping the Legg Mason name from its mutual funds as part of a push to make its brand better known.

Fund Returns

“I recognize that the status quo is not an option,” Sullivan said during a conference call Oct. 26 with analysts and investors. “We are reviewing and evaluating our current business strategy with our affiliate leadership and our board and are prepared to modify as appropriate.”

Activist investor Nelson Peltz said last year that he expected Western Asset to lead the firm’s turnaround. The $10.1 billion Western Asset Core Plus Bond Fund (WACPX:US) returned 8 percent this year through yesterday, beating 86 percent of competing fixed-income funds, according to data compiled by Bloomberg.

A dispute among executives over who should handle distribution in the retail and defined contribution channels is fueling a possible split of Western Asset and Legg Mason, Pensions & Investments reported Oct. 29.

To contact the reporter on this story: Alexis Leondis in New York at

To contact the editor responsible for this story: Christian Baumgaertel at

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