Martin Currie deal plugs Legg Mason product gap

Legg Mason's acquisition of Scottish equities boutique Martin Currie comes after the US fund house closed its Esemplia Emerging Markets affiliate last year.
Martin Currie deal plugs Legg Mason product gap

Legg Mason’s purchase of UK funds boutique Martin Currie, announced yesterday, helps plug a hole in the US asset manager's product range that had grown with its closure of emerging markets specialist Esemplia last year.

The deal, which is expected to close in the fourth quarter, adds Martin Currie’s active Asian, emerging market, global and European equity strategies to its line-up, along with $9.8 billion in AUM.

The move follows Legg Mason chief executive Joseph Sullivan's comments to AsianInvestor late last year that he was on the lookout for acquisitions and comes after other recent purchases.

The Baltimore-based manager needed to strengthen its offering in the areas of Asian, emerging market and European equities, noted a source familiar with the firm. Martin Currie is an active, fundamental research-driven firm, which fits with the US group’s needs, he added.

“I wouldn’t expect any changes at Martin Currie, except that Legg Mason can help the UK firm enhance its distribution activities,” said the source.

Willie Watt, chief executive of Martin Currie, confirmed: “In partnership with Legg Mason, we will have efficient access to new markets and client segments through their market-leading and sizeable retail distribution network as well as valuable seed capital."

Martin Currie will be an independent affiliate under Legg Mason, like the group's other fund houses. The Scottish firm will be responsible for its own portfolio management and institutional business and will work with the parent with regard to third-party fund distribution.

Legg Mason's other affiliates are value investor Brandywine Global, active equity firm ClearBridge Investments, fund-of-hedge-funds firm Permal Group, quantitative equities firm QS Investors, US small-cap specialist Royce & Associates and bond giant Western Asset Management.

“Martin Currie’s active international equity capabilities fill our largest product gap and are a perfect complement to our existing investment capabilities,” said Sullivan.

The newly acquired firm comes with a broad institutional client base spread across Australia, Asia the Middle East, Africa and the US.

Legg Mason closed Esemplia because its assets were shrinking and it didn’t feel there was a way of turning it around, said the source. Staffed by 25 people, the firm had assets under management of about $500 million. Former Esemplia chief investment officer Aquico Wen went on to set up his own firm, Victoire Asia, as a subsidiary of a Brazilian group.

Under the acquisition agreement, Legg Mason Australian Equities, which manages $2.5 billion under a 14-strong team led by Reece Birtles, will become part of Martin Currie. The Australian equities manager runs small cap, property, infrastructure, income and large cap value strategies.

The move is part of Legg Mason’s strategy to create fewer and larger investment affiliates.

In October, after buying fund-of-hedge-funds firm Fauchier Partners, it said it was mulling potential acquisitions. “We want firms that are performance-accretive, leveragable and scalable – ones that are looking 20 years down the road,” said Sullivan, who took over as chief executive in February last year.

In March, Legg Mason said it was acquiring New York-based customised solutions and quantitative equities firm QS Investors. At the time of the deal, QS managed assets of $4.1 billion and had some $100 billion in assets under advisory.

Batterymarch Financial Management, Legg Mason’s existing quantitative equity platform, and Legg Mason Global Asset Allocation, its solutions platform, is being integrated into QS Investors.

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