Western Asset Management Co (WAMCO) has finally stemmed its outflows after eight years, bringing in $9 billion in net inflows in the fiscal year ending March 31.
The fixed income manager, and subsidiary of Legg Mason, lost nearly a quarter of its assets under management following the financial crisis, reports Pensions & Investments. Wamco suffered years of poor performance, with its core-plus bond strategy producing -9.95% returns in 2008, and the industry was unforgiving, until recently. Morningstar named Wamco fixed income manager of the year for 2014, and about 93% of its strategies outperformed their benchmarks for the three-year period ending in March. The firm had $634.4 billion in assets under management at the end of 2007, falling to $482.2 billion two years later. The firm continued to bleed another $100 billion between March 31, 2010 and March 31, 2014. Writes P&I:
“They kicked and scratched and crawled their way back,” said Joseph Sullivan, CEO of Baltimore-based Legg Mason (LM) Inc. (LM), the publicly traded company that owns Wamco. Mr. Sullivan said he believes Wamco is poised to gain strong net inflows in the next few years and substantially increase its $446 billion in assets under management. “We haven’t felt this good about Western since before the beginning of the financial crisis,” he said
Wamco picked quite the time to revive, with rising interest rates looming in the near future. Sullivan says the firm believes interest rates will rise gradually, and the firm will benefit from its credit issues focus. The firm also seems to be benefiting from Pimco’s massive asset losses in the last year. Wamco CEO James Hirschmann III says the firm siphoned about $10 billion in inflows from Pimco since Bill Gross left at the end of last September.
More institutional consultants are willing to recommend Wamco to clients, bringing the firm big mandates from investors in the last year such as the El Paso Firemen & Policemen Pension Fund and the School Employees’ Retirement System of Ohio. Wamco learned its lesson from the core and core-plus bond failures, adding more focus to high yield, emerging markets, bank loans, and unconstrained strategies.
Greggory Warren, a Morningstar equity analyst, said Wamco is definitely on the right track to attract inflows, noting its improved performance as well as the turmoil at Pimco have set in motion the potential for money moving around in fixed-income investments. “The point is they are a viable option now,” Mr. Warren said of Wamco. “They had been written off by institutional investors. Once you lose your reputation, it’s hard to get back it back.”
Photo: WesternAsset.com.