Legg Mason CFO says reviewing business strategy, open to change

Tue Nov 13, 2012 8:03pm EST

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(Reuters) - Money manager Legg Mason Inc, which has eight main investment subsidiaries, is reviewing its business strategy and is "prepared to modify it as appropriate," Chief Financial Officer Pete Nachtwey said on Tuesday.

Legg Mason, which is the fourth-largest publicly traded U.S. fund manager, has been roiled by customer outflows and mixed investment performance over the past few years and is currently searching for a new chief executive. Some of Legg Mason's subsidiaries have been displeased with the parent company's sales efforts.

"We are reviewing and evaluating our current business strategy with our affiliate leadership and our board and are prepared to modify it as appropriate," Nachtwey said at the Bank of America Merrill Lynch Banking and Financial Services Conference in New York, which was webcast.

Still, the Baltimore-based firm, with $646 billion under management at the end of October, is well-positioned to grow and has "significant strengths we think are sometimes under-appreciated," Nachtwey said.

Shares of Legg Mason closed down 0.6 percent at $25.00 on the New York Stock exchange on Tuesday. The shares have lost 5.2 percent so far this year.

The firm's previous CEO, Mark Fetting, stepped down at the start of October amid internal disagreements over the relationship between the parent and its affiliated investment managers, such as its Western Asset Management bond unit and its ClearBridge Advisors equity unit.

Some have urged a breakup of the company, though it is not clear that would benefit shareholders who own stock that has been stuck around a quarter of its value in 2007, before the financial crisis.

Legg Mason's board also includes the activist investor Nelson Peltz, who owns a roughly 10 percent stake in the company under ownership restrictions that end on November 15. He has not commented on his intentions toward Legg Mason after that date.

Nachtwey did not address Peltz's ownership or the CEO search.

Nachtwey defended current arrangements in which Legg Mason owns its affiliates outright but has different revenue-sharing agreements with each.

Asked if the company might make the arrangements all the same, Nachtwey said a more likely path would be for an affiliate to sell the parent company a higher percentage of its revenue instead.

The company is still focused on growth, he said, and reiterated past comments that Legg Mason would be most interested in acquiring shops that specialize in international assets, equities or alternative investment areas.

(Reporting By Ross Kerber in Boston; Editing by Leslie Adler)

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