Legg Mason has made a strategic investment, an acquisition, and combined two firms to up their alternative asset and exchange traded fund (ETF) game.
The global asset management firm announced it acquired a majority equity interest in diversified real estate investment firm, Clarion Partners.
Clarion manages approximately $40 billion across the real estate risk/return spectrum and will operate as the primary independent real estate investment affiliate for Legg Mason.
Under the terms of the transaction, Legg Mason will acquire an 83 per cent ownership stake in Clarion Partners for $585 million and will pay for its portion of certain co-investments on a dollar for dollar basis, estimated at $16 million as of 31 December 2015.
Legg Mason chairman and chief executive, Joe Sullivan, said, “Clarion Partners, with a focus on strong performance through market cycles, a positive growth profile and differentiated product offerings brings an important alternative asset class to our portfolio of investment managers”.
Adding to its alternative asset strategy, the firm has entered into a definitive agreement to combine its existing hedge fund platform, Permal, with independent hedge fund investor and alternative asset manager, EnTrust Capital.
As a result of the combination, Legg Mason will own 65 per cent of the new entity, EnTrustPermal, with 35 per cent being owned by EnTrust’s co-founder and managing partner, Gregg Hymowitz.
Hymowitz will become the chairman and chief executive of EnTrustPermal. The new firm will have the global infrastructure, resources, investment professionals, and underlying investment managers to source, research, and structure investment opportunities worldwide on behalf of its international client base.
“The team at EnTrust has a proven track record for driving significant organic growth through product innovation, with over 20 per cent growth annually since the financial crisis. We see meaningful opportunities to combine this innovation with Permal’s blue chip client base, product offering, and global footprint,” Sullivan said.
The combination is expected to close mid-2016.
On the ETF front, Legg Mason has acquired a minority equity position in Precidian Investments, a firm specialising in creating innovative products and solutions, and solving market structure issues, with regard to the ETF marketplace.
Precidian leverages its patented intellectual property to both power its own ETF products subadvised by unaffiliated managers, and to work with financial services firms to jointly develop solutions, structures, and products to meet investor needs.
“We believe their [Precidian] ActiveShares process for active ETFs is the best ETF solution for the active management industry,” Sullivan said.
“Investors increasingly demand outcome oriented strategies in complex and interconnected global markets, and we believe Precidian’s products and solutions are well position to meet that need.”
