The mutual fund industry has been losing investor assets as market volatility pummeled fund assets and investor sentiment. Despite the market woes, the exchange traded fund business is still expanding, and investment management firm Legg Mason (LM) and other fund companies are taking notice.
Mark Fetting, CEO of Legg Mason, says he is “testing the waters” in the ETF space as he considers expanding into Europe and Asia, reports Jessica Toonkel for Reuters.
“We are looking to see if there are some niche areas as opposed to going aggressively into let’s say the commodity space, which I think is more of an oligopoly,” Fetting said in the Reuters article.
The investment company is looking to grow its business organically, or look for potential acquisitions in Europe and Asia to gain investment expertise and a foothold in the regions, Fetting added.
However, Fetting is concerned about the ETF business model, as the industry products have lower fees and lower profit margins.
“So the question of where the value for the shareholder is for us has to be asked alongside meeting emerging demand,” he said.
Last year, Legg Mason lost a star fund manager, Bill Miller, who stepped down from the helm of the flagship Value Trust Fund after weak performance and asset outflows. At the end of December, Legg Mason had $627 billion in assets under management, compared to $1 trillion in 2007. [Active Manager Flameouts Drive Investors to ETFs]
“We are now focused on growing the business,” Fetting said.
In November, the firm filed with the Securities and Exchange Commission to launch an actively managed fixed-income ETF that will compete with the PIMCO Enhanced Short Maturity Strategy Fund ETF (NYSEArcxa: MINT). [Legg Mason Files to Launch Bond ETF]
WisdomTree recently announced a partnership with Legg Mason’s Western Asset Management to create global active fixed-income ETFs.
For more information on mutual funds, visit our mutual funds category.
Max Chen contributed to this article.