Legg Mason CEO Joseph Sullivan has mounted an aggressive plan to dump the company's money-losing affiliates while searching for a way to fulfill his biggest initiative yet: expanding the company's equity offerings beyond the U.S.
“We need to add or build a non-U.S. equity brand,” Mr. Sullivan said in an interview. ”We need to move aggressively on that because we need a better capability.”
Several of Baltimore-based Legg Mason Inc.'s investment affiliates have international equity strategies, including ClearBridge Investments and Royce & Associates. But none is sizable, he said.
“We don't have a singular brand that we can build and leverage in the international space,” he said.
Mr. Sullivan said an acquisition would be the fastest way to build a non-U.S. equity franchise, but noted the process can be long. He said he is open to other possibilities, such as a combination of an acquisition and organic growth.
Analysts say buying a major international equity franchise might prove difficult for Mr. Sullivan. But without it, he is going to have a hard time achieving the growth he wants.
Robert Lee, an equity analyst at Keefe, Bruyette & Woods Inc. in New York, said Mr. Sullivan needs to fix Legg Mason's investment offerings to keep pace with competitors in such areas as alternatives and international equities. He said a non-U.S. equity franchise is key.
“Not having a broad global capacity has certainly hurt,” said Mr. Lee.
Legg Mason will not be able to compete adequately in overseas markets without offering major international equity strategies, said Greggory Warren, a senior stock analyst at Morningstar Inc. in Chicago. He said overseas investors will not be satisfied with just buying U.S. strategies.
“The only real growth is going to be overseas,” he said.