Legg Mason Applies to Run Exchange-Traded Funds for First Time

(Bloomberg) -- Legg Mason Inc. applied to run actively managed exchange-traded funds for the first time in its 27-year-history as a public company, seeking to capture a slice of the asset-management industry’s fastest-growing segment.

Baltimore-based Legg Mason filed an application with the U.S. Securities and Exchange Commission yesterday. The application may take months to complete and the company has yet to decide on a specific strategy for the first ETF it markets to investors, Mary Athridge, a spokeswoman for Legg Mason, said in an interview today.

“We are not looking to clone products” such as the Legg Mason Capital Management Value Trust run by Bill Miller, she said. The company is considering fixed income and equity strategies for ETFs, she said.
Legg Mason’s application follows a similar move by Baltimore rival T. Rowe Price Group Inc., which filed an ETF application in December. ETFs are the fastest-growing segment of the asset-management industry, with assets soaring more than 10- fold in the past decade, compared with a doubling of assets in mutual funds, according to data from the Investment Company Institute in Washington.

Unlike traditional mutual funds, which are priced at the end of each day and report their holdings quarterly, ETFs trade on an exchange and are required to reveal the securities they own on a daily basis. Most ETFs are passively managed, like the SPDR Trust that tracks the Standard & Poor’s 500 Index of large U.S. stocks.

Industry Leader

BlackRock Inc. became the industry leader with $495.5 billion in ETF assets after acquiring Barclays Global Investors from Barclays Plc in December.

ETFs assets in the U.S. surged 46 percent to $777.1 billion last year, driven by $116.5 billion in sales, data from Washington-based ICI show. Investors pulled $8.8 billion from stock mutual funds in the U.S. in 2009 after withdrawing a record $233.8 billion in 2008.

Legg Mason had $679 billion in assets under management as of Jan. 31. The company has ClearBridge Advisors LLC, Western Asset Management Co. and Royce Management Co. as affiliates.
Legg Mason declined 28 cents to $25.72 at 12:47 p.m. in New York Stock Exchange composite trading. The stock has doubled from a year earlier.