Mark Fetting, chief executive officer of Legg Mason Inc., was out of time.
His biggest investor, Nelson Peltz, had watched for three years as Fetting struggled to increase profit at the Baltimore- based money manager and halt $135 billion in fund redemptions.
At Peltzs behest, Fetting cut costs by as much as $150 million a year and bought back at least $1 billion in stock. Still, the shares hadnt gained much since Peltzs hedge fund bought its stake in mid-2009. With a standstill agreement set to end in November, allowing Peltz to raise his holdings or propose a slate of directors, Fetting quit.
Patience was clearly running out, Jeff Hopson, an analyst at Stifel Nicolaus & Co. Inc. in St. Louis, said in a telephone interview. The odds of a dramatic corporate change have increased at Legg Mason.
Legg Mason is typical of the investments made by Peltz and partners Peter May and Ed Garden, who target underperforming companies including H.J. Heinz Co. and Wendys Co. and nudge them to cut costs, spin off
businesses or add new products. The approach is proving popular, according to investors, with Peltzs Trian Fund Management LP set to wrap up $1 billion in new commitments from big institutions betting hell outperform other stock pickers in a market where many equities are moving in lock-step with each other.
Yet Legg Masons lackluster performance shows the challenges for activists like Peltz, who can no longer rely on a market rally to help lift assets. Trians $2.2 billion Master Fund, its original hedge fund, is unchanged this year through August, according to investors, as the Standard & Poors 500 Index returned 14 percent including reinvested dividends.
Milken Connection
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