Sun rising in the Nordics for Legg Mason
Peter Andersson, director of business development at Legg Mason, talks about the firm’s objectives in strengthening its local presence in Nordic markets
Legg Mason has looked to boost its presence in the Nordics with a dedicated resource in the form of Peter Andersson and a key product: the US small caps Legg Mason Royce Smaller Companies fund.
This is available through SkandiaLink, Nordea Guided Fund Universe and Fondmarknaden. It will also be available on the Nordnet platform.
Investors are also interested in Legg Mason’s range of fixed income funds, according to Anderson – particularly global high yield and strategic bond funds.
Royce & Associates has $45bn in US small- and mid-caps under management, and has about 10% in non-US assets.
It is an example of the affiliate expertise that Legg Mason uses to develop asset management business in different markets and regions around the world. Each affiliate is wholly owned by Legg Mason Inc.
One of the ways this structure can distinguish itself is the way the various affiliates can have direct segregated business with institutional or other types of clients in the Nordic region, separately from the business of selling packaged products.
An example of this segregation would be Western Asset Management, another Legg Mason affiliate pursuing Nordic institutional pension clients.
The new business “hook” regarding the Royce fund is the strict selection criteria that Royce & Associates applies before buying stocks, and the way it follows a value approach, as proven through its US funds business.
Legg Mason typically does not comment on precise AUM, but Andersson says the inflows for the year running from 1 April have been good at $422m.
Like most with a working knowledge of the region, he stresses the different nature of the four main markets.
Based on experience, he suggests Norway as a market – compared with Sweden – exhibits a greater appetite for equity-based risk, but that the latter as well as Finland also have a strong preference for equities.
Fixed income is an important part of portfolios, but tends to be very heavily skewed towards domestic government bonds and local corporate bonds.
Types of investors being targeted vary. Andersson is looking at Sweden’s market in respect of retail opportunities, including banks, insurers, online brokers, fund of funds, wealth managers and local financial advisers.
The role does not include chasing investors, such as the Norwegian sovereign wealth fund – the Pension Fund Global , the so-called “oil fund”.
A key challenge for any business trying to increase its local presence is the established competition.
Not only does a market such as Sweden have domestic manufacturers, but many international players are also present, such as Aberdeen, First State, Franklin Templeton and JP Morgan. BlackRock recently opened a new Copenhagen office.
In response, Andersson believes Legg Mason can do well by focusing on what it is good at, such as US equities.
Another challenge is exchange rates and currency volatility. Of the four main markets, only Finland uses the euro as its currency.
As a result, domestic investors in each market can be turned off by investing in overseas assets given how returns from, say, US Treasuries can be nullified by a swing in the SEK/$ rate.
Hedging is something to consider in this context. Andersson confirms that Legg Mason can do all its fixed income funds in SEK, NOK, DKK and the euro.
The provider is also aiming to launch SEK-hedged share classes in its equity fund range in the fourth quarter of 2011.
Funds domiciled outside the region that fail to adapt to this type of local demand may find it harder to make sales, Andersson suggests.