Baltimore money manager Legg Mason Inc. is overhauling its mutual fund lineup and planning to introduce two products after losing millions last year in the market turmoil and as investors pulled money out of its funds.
The reorganization means the company likely will whittle its current offering of 142 mutual funds, Matthew Schiffman, Legg's head of product and marketing, said yesterday.
Legg still expects to introduce two new funds in the spring, said Schiffman, who was appointed to the new position in November to create a product innovation team.
One new fund would invest in municipal bonds. The other is designed as a global allocation portfolio, pulling together mutual funds from Legg's management subsidiaries and other investments, such as exchange-traded funds, Schiffman said.
The changes are designed to help bolster Legg, some of whose mutual funds performed among the worst in the industry in 2008. And industry analysts expect the company to weed out some of its weakest-performing funds in hopes of luring more investors back to Legg's products.
Schiffman said the market turmoil is prompting fund companies to re-examine the strength of their product lineup.
Last year "was clearly off the chart from everyone's experiences and expectations," he said. "All of us, investors and money managers, stumbled out of 2008. ... We need to get back to the basics of getting people to the table and restoring confidence that long-term investing makes sense."
Like many in the mutual fund industry, the worst stock market returns since the Depression hurt Legg's financial performance. The company's assets under management fell nearly 9 percent to $841.9 billion at the end of September, from $922.8 billion in June. And some of Legg's flagship funds, including Bill Miller's Value Trust, posted the weakest returns among their peers.
Across the industry, investors withdrew record amounts from their mutual funds and other investments.
Legg clients withdrew $21.8 billion from the company's stock and bond funds last year, second only to Fidelity Investments, according to data complied by Morningstar Inc.
"The industry has always been in a state of evolution, whereby some strategies come to the fore and others fade," said Jeff Tjornehoj, a senior research analyst at Lipper.
"And 2008 sort of hastened that movement to shed weaker-performing portfolios and strategies, so it's not surprising that firms are evaluating what works and what doesn't work and accelerating the demise of certain portfolios."
