Citigroup, the owner of the Smith Barney brokerage, has lost exclusive rights to sell Legg Mason funds following slowing sales. In December 2005, Legg Mason traded its brokerage unit for Citigroup's investment unit. The transaction vaulted Legg Mason from a regional brokerage to the second-largest publicly traded asset manager in the country. The companies have renegotiated the sales agreement that accompanied that exchange to permit Legg Mason to market its funds through brokers other than Citigroup, with the exception of its retail funds, which will continue to be sold exclusively through Smith Barney. The WSJ notes that the renegotiation frees Legg Mason to expand into potentially lucrative fee-based accounts. The new terms will allow "each firm to pursue its goals while preserving our very important relationship," said Legg Mason SEVP Mark Fetting. Legg Mason's renowned Value Trust Fund, run by Bill Miller, is down 0.7% this year, behind 91% of equivalent rival funds. Investors put $5.4 billion into Legg Mason funds in the first seven months of 2007 versus $49.6 billion for the Vanguard Group, the current market leader.
Sources: Wall Street Journal, Bloomberg, Reuters
Commentary: Citigroup Missing Legg Mason Sales Targets, Could Force Renegotiations • Legg Mason: Strong Earnings Distract From Dismal Outlook
Stocks/ETFs to watch: LM, C. Competitors: BLK. ETFs: IAI
Earnings call transcript: Legg Mason F1Q08, Citigroup Q2 2007
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