Officials at Western Asset Management Co. are putting the disastrous results of 2007 and 2008 behind them, looking to build the business internationally and offering a slate of new strategies.
“We want to be much more of a global player,'' James W. Hirschmann, CEO of the Pasadena, Calif.-based money manager, said.
Non-U.S. clients now account for 30% of WAMCO's $506 billion in assets. “We'd love to see that number more toward 50% over time,” Mr. Hirschmann said. “But predicting AUM growth I've found to be an art rather than a science.”
He said WAMCO is bringing in new business in a number of credit strategies, including investment-grade bonds, high-yield bonds and bank loans.
Abroad, he also said the firm plans to build its business in Asia, as public debt markets there evolve. WAMCO officials also want to develop their global insurance subadvisory business, as insurers continue to outsource management of their assets.
In addition, clients are looking to global and U.S. inflation-indexed bonds as a way to hedge against inflation risks. And WAMCO's cash management business is growing, as clients are fleeing smaller and weaker competitors.So far in 2009, the company has experienced a spectacular turnaround in performance, with core fixed-income strategies outperforming the Barclays Capital Aggregate bond index by wide margins.
The company's core bond portfolio was up 22.8% year-to-date as of Oct. 30, compared with a 6.8 % increase for the Barclays Aggregate index, according to data from Angeles Investment Advisors LLC, a Santa Monica, Calif.-based consulting firm.
In 2008, core bonds underperformed the benchmark by 14.2 percentage points, returning -8.96% vs. the benchmark's 5.24% return, according to eVestment Alliance LLC, Marietta, Ga.
Similarly, Western's U.S. Core Full strategy, which is a core-plus portfolio with $75.4 billion in total assets, produced bottom-quartile results in 2008, returning -9.94% in 2008, 15.2 percentage points below the Barclays Aggregate index, according to eVestment Alliance. Results for 2007 also were in the bottom quartile.
In the first three quarters of 2009, core-plus bonds returned 18.4% return — 12.7 percentage points above the benchmark, propelling the strategy into the first quartile.
“They had a terrible 2008 and a fantastic 2009,” said Michael Rosen, principal, with Angeles. “It's nice to see them come back.''
Mr. Rosen said WAMCO made mistakes in the later part of 2007 and 2008, such as not owning enough Treasuries and owning too many non-agency mortgages. Last year, company officials told Pensions & Investments that they had underestimated the severity of the financial market meltdown, adding risk to their portfolios after the Federal Reserve moved to reassure the markets in the fall of 2007 (P&I, Aug. 18, 2008.). The company subsequently made a number of senior-level executive changes.
Those mistakes, and the resulting poor performance, led to investors pulling their money from the firm.