Legg Mason pact could bring millions in assets Broker helps win lucrative contract

July 08, 1992|By David Conn | David Conn,Money Management LetterStaff Writer

Legg Mason Wood Walker Inc., a Baltimore investment company, has beaten out 15 competitors and tapped into a market that could attract $400 million in managed assets over the next five years -- mostly because of the work of one broker.

Two years ago, broker Michael Graham heard from a client that the American Society of Association Executives (ASAE) might be seeking investment advice for its members.

The result was Legg Mason's selection as the financial consultant of choice for ASAE's 9,000 member associations or for any association that asks the Washington-based ASAE for a recommendation.

Last fall, after a six-month search, ASAE rejected 15 other contenders, including Merrill Lynch, Shearson Lehman Bros. and Baltimore's Alex. Brown & Sons, and agreed to sign a five-year contract with Legg Mason.

The contract was signed in January. Since then, the parties have been ironing out details of the program, sending advertising to associations in about 10 markets and signing up the first few clients.

After monitoring its progress for a few months, Legg Mason chose yesterday to announce the contract.

"For all we knew, it was going to fall flat on its face," Mr. Graham said in explaining the delay.

A 44-year-old alumnus of Dean Witter Reynolds in New York and T. Rowe Price Associates Inc. in Baltimore, Mr. Graham ran his consulting firm for six years before joining Legg Mason as an investment consultant in 1988.

Instead of falling flat, the ASAE advisory program has surpassed Mr. Graham's expectations, he said, and has become, in effect, Legg Mason's first national marketing effort, aside from the mutual fund ads in investment magazines.

Inquiries from more than 300 associations have come in, and Legg Mason has prepared investment policies for 40 or 50 groups. Six associations have turned over their assets for Legg's stewardship.

"It's very helpful to us because we don't have the staff and expertise to go look around for cash or long-term investments," said Robert Carey, president of the 2,700-member Produce Marketing Association. In late March, the Delaware-based group became one of the first associations to join the program.

At the current rate, Mr. Graham said, Legg Mason expects to attract about $100 million in assets to be managed in each of the next four years. It is unclear how much revenue that would mean for Legg Mason, since the fees would vary according to the services provided.

Under the arrangement with the ASAE, Legg Mason would meet with an association's executives and propose an investment policy at no cost.

That policy could recommend that Legg Mason provide the portfolio management services directly, through its Legg Mason Capital Management subsidiary, or that an independent firm make all of the investing decisions. Either way, if the association signs up, Legg Mason holds the money, makes the trades requested by the investment adviser and collects an annual fee that covers the charges associated with holding the client's funds.

Among the services Legg Mason would offer are its mutual funds, portfolio management through Legg Mason Capital Management and a certificate of deposit and money market exchange.

Money managers

E9

Top firms and assets under management, in billions.

1) Merrill Lynch.. .. .. .. .. .. .. ..$118.8

2) Shearson Lehman.. .. .. .. .. .. .. ..84.1

3) Paine Webber.. .. .. .. .. .. .. .. ..32.5

4) Goldman Sachs.. .. .. .. .. .. .. .. .27.1

5) Oppenheimer .. .. .. .. .. .. .. .. ..22.0

6) Morgan Stanley .. .. .. .. .. .. .. ..18.5

7) Lazard Freres.. .. .. .. .. .. .. .. .15.7

8) Yamaichi Securities.. .. .. .. .. .. .13.9

9) First Boston.. .. .. .. .. .. .. .. ..10.7

10) LEGG MASON.. .. .. .. .. .. .. .. .. 10.5

11) Smith Barney.. .. .. .. .. .. .. .. ..7.8

12) Salomon Brothers.. .. .. .. .. .. .. .7.7

13) Kidder Peabody.. .. .. .. .. .. .. ...6.7

14) Gabelli & Co... .. .. .. .. .. .. .. .6.2

15) Piper Jaffray.. .. .. .. .. .. .. .. .4.8

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