Money manager Legg Mason Inc., struggling to boost its stock price and stem 19 straight quarters of net withdrawals from its funds, said Chief Executive Mark Fetting will step down effective Oct. 1.
Investors applauded the news, sending Legg Mason shares up 5.4 percent to $26.85 in New York trading Tuesday.
Fetting took over the Baltimore-based fund giant as the financial crisis was intensifying in early 2008, and tried to fix the company's troubles with deep job and debt cuts.
But Legg Mason's funds have posted a mixed performance record since then and its shares have not come back like those of some competitors. Earlier this year, Legg Mason's star fund manager, Bill Miller, gave up management of his main fund after a string of sub-par results.
Since 2009, Fetting has also had to deal with activist shareholder Nelson Peltz, who often presses for changes at companies in which he invests. Peltz has not objected publicly to Fetting's policies — so far.
Peltz also sits on the Legg Mason board, and his Trian Fund Management firm has agreed to refrain from buying more shares. But that agreement will expire soon, giving Peltz room to ramp up pressure on the money manager.
Peltz's firm did not immediately respond to questions on Tuesday.
Pete Nachtwey, Legg Mason's chief financial officer, said the board and Fetting had agreed that "this is an appropriate time to transition leadership of the firm."
Speaking at a financial services conference that was webcast, Nachtwey did not mention Peltz or Trian but denied the change in leadership was hasty.
When a conference participant said that "it seems like Mark (Fetting) is being run out the door pretty quickly," Nachtwey responded that there was "no bum's rush whatsoever."
Legg Mason said Joseph Sullivan, the firm's global distribution head, would become interim CEO when Fetting stepped down. The firm is among the largest fund companies in the United States; as of the end of June it managed $632 billion of assets.
In its press release, the firm said the board had formed a search committee that will review internal and external candidates for CEO.
Fetting will step down Oct. 1 but will remain a consultant to the firm through the end of the year, it said.
At the conference, Nachtwey said one possibility was that Sullivan would become permanent CEO. "This is not a caretaker," he said, but added that "sometimes fresh blood is helpful."
Nachtwey said Legg Mason's turnaround was continuing.
Lead independent director W. Allen Reed will become Legg Mason's non-executive chairman, a post Fetting also holds.
PATIENCE WEARS THIN
In July Legg Mason reported its 19th straight quarter of net withdrawals from its funds, and investors have been increasingly frustrated waiting for Fetting to improve the performance of the funds after losses during the financial crisis.
Legg Mason's stock remains stuck at about one-quarter of its price of around $100 in mid-2007 before the crisis hit. Shares of rivals like BlackRock Inc. and T. Rowe Price Group Inc. have already recouped all their losses and more.
Legg Mason's board cut Fetting's compensation by 17 percent to $4.94 million in its latest fiscal year, to reflect a lagging stock price and lackluster returns.
For years, Legg Mason was best known as the home of Bill Miller, whose fund outperformed the Standard & Poor's 500 index 15 years in a row. But Miller's performance tailed off starting in 2006. He stepped down from his best-known fund earlier this year.
The financial crisis also blew up a bet that Legg Mason founder and prior CEO Raymond "Chip" Mason made in 2005 when he swapped the firm's brokerage unit for Citigroup Inc's asset-management business.
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