US - Citigroup and Legg Mason are said to be in the final stages of negotiating a swap deal of Citigroup's $460bn asset management operations for Legg Mason's brokerage unit.
According to the Wall Street Journal, talks were continuing last night to agree a deal.
Such a deal would catapult Legg Mason into the top ranks of US asset management. Legg Mason has $376bn in assets under management, with 40% in equities, 59% in fixed income and 1% in cash, according to the Global Pensions Top 100 Global Fund Managers 2005 survey.
Under CEO, Raymond Mason, Legg Mason which acquired Western Asset Management in 1986, has been deliberating remodeling itself from being a value equity oriented provider of brokerage services to high net worth investors to an active institutional asset manager.
On the other side of the deal Citigroup’s exit from the asset management business would represent a further departure from the financial supermarket concept led by chairman Sanford Weill. In Q1 trading, Citigroup Asset Management contributed $79m, or 1.45% to the group’s bottom line.
A US consultant said that Citigroup had this week declined from participating in a tender for a large US public pension fund mandate, because of the ensuing “uncertainty.”
In addition, a superannuation fund in Australia which has two mandates, an Australian equity and an emerging markets brief with Citiigroup Asset Management said that the “writing was on the wall” for this deal. A shift to Legg Mason if Citigroup portfolio managers are part of the deal would not be of great cause for concern, he said.
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