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Legg Mason (LM) to Increase Stake in Precidian Investments

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Legg Mason is in the process of increasing its existing 20% stake in Precidian Investments to 75% over an approximate period of nine months. Per Legg Mason spokesperson, the transaction will cost around $25 million.

Precidian is one of the firms which has developed a SEC-approved structure for non-transparent actively managed ETFs. Per Legg Mason CEO Joe Sullivan, 14 firms have licensed the “ActiveShares” structure, which represents one-quarter of the assets in U.S. equity mutual funds, at present.

“We notified Precidian last week of our intent to exercise our option to acquire a majority stake in the company [Precidian] and we will be working very closely with them to continue the buildout of this important capability for our industry,” Sullivan said.

Notably, using the “ActiveShares” structure, an ETF has been filed by Clearbridge affiliate of Legg Mason, which would be the first non-transparent fund. Therefore, the Clearbridge Focus Value ETF (CFCV) will make investments in large-cap U.S. stocks in order to earn long-term capital appreciation.

Legg Mason’s diverse product offerings and investment strategies will continue to attract investors, which along with improving assets under management (AUM) balance, are expected to support revenue growth. Amid the ongoing trend in the finance industry under which investors are increasingly inclined toward passively managed products like index funds and ETFs compared with traditional mutual funds, foraying into such a market will be the driving factor for Legg Mason.

Shares of the company have gained 5.9% in the past six months compared with 17.4% growth recorded by the industry. Currently, Legg Mason carries a Zacks Rank #2 (Buy).

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