Legg Mason is banking on the expertise offered by its multi-boutique business model to unlock the already crowded Italian market.
The Royce investment approach can lead to underperformance, says a note from Standard & Poor’s, “chiefly during the more momentum-driven markets.
Even so, the fund’s longer-term track record shows consistent outperformance of the S&P peer median and its Russell 2000 benchmark.
Over five years to the end of September 2010, it sits within the top quartile of our peer group (14 percentage points ahead of the median) and 12 percentage points ahead of the index.”
Royce is consistently rated as one of the best performing funds houses in the US. Negri says: “Royce is one of the industry’s most experienced, highly respected and pioneer small-cap value investment managers.”
The main challenge for any funds house in Italy is how to distribute products. The biggest networks are controlled by the big banking groups, such as UniCredit, Banca Intesa Sanpaolo and Banca Generali.
Each of these will have asset management subsidiaries, or operate funds platforms featuring the best available international funds houses.
The competition is stiff, but Legg Mason believes its multi-boutique business model, which offers specialist expertise, is the way to win market share.
Apart from the banking networks, the options include the financial adviser networks, such as Mediolanum, online banks (Fineco, a subsidiary of UniCredit group) and funds supermarkets (for example, OnlineSIM).
Each of these offer different routes into different segments of the Italian market.
As a recent arrival on the Italian market, Legg Mason is looking to establish its presence by focusing on a specific market segment.
“At this phase,” says Negri, “our business plan is focused particularly on professional investors. Then we will sign agreements with companies focused on distribution channel, with the aim to build strategic partnerships.”
The Legg Mason strategy, says Negri, is “to grow quickly in all market segments that can offer interesting opportunities.
We think that the best approach is to meet client needs that change quickly on the basis of market trends and asset allocation choices.
“For this reason, it is important to support clients through more and more detailed reports with the aim to drive them to the best choices they can take. Client knowledge on a full scale is a key winner on the market.”