Late in January, Legg Mason announced it had completed the acquisition of three businesses to diversify its sources of income.
All three deals are designed to strengthen areas where Legg Mason’s asset management business needed to be stronger.
Legg Mason is a global investment management firm based in Baltimore focusing on asset management. It owns a large variety of equity and fixed income funds.
The first deal for Legg Mason is merging EnTrust Capital, a New York firm investing client money into hedge funds, with Legg Mason’s Permal Group, a fund-of-hedge-funds fund. The new, combined affiliate will be named EnTrustPermal. With $29 billion of assets it will be one of the largest such groups. Legg Mason will own 65%. EnTrust founder Gregg Hymowitz will own the rest. He will serve as chairman and CEO of EnTrustPermal.
According to Legg Mason this acquisition created “a significant potential growth engine” for Legg Mason. The merger increases the range of hedge fund managers available to Legg Mason clients.
“Scale matters in this business,” according to Hymowitz. He has invested in such hedge funds as: Pershing Square Capital Management LP, Trian Fund Management LP and Third Point LLC.
Legg Mason was late to enter the Exchange Traded Fund (ETF) market. Therefore, its second deal of the day, acquiring a 20% stake in Precidian Investments, will help Legg Mason expand its line of ETFs.
With its product line, Precidian Investments is innovating the concept of ETFs. Currently, the vast majority of ETFs simply reflect the value of an underlying index. Precidian is offering Managed Distribution ETFs. It has also designed ActiveShares to allow actively managed ETFs. It is seeking approval for ActiveShares from the Securities and Exchange Commission (SEC).
In the final acquisition, Legg Mason bought 83% of Clarion Partners LLC, a real estate specialist, for $585 million. Clarion was founded in 1982 and manages $40 billion in assets. Its properties are diversified. It says it seeks to acquire: retail, industrial, office, multifamily residential, retail, and hotel properties. Also, it invests in housing for university students through on and off campus projects. Also, it invests internationally. It seeks properties not only in the United States, but also Mexico, the United Kingdom, the Middle East and the Eurozone. It purchases mezzanine financing debt and provides equity to developers. It forms joint ventures and seeks to acquire 100% ownership.