Citigroup Inc. said yesterday that it is buying back its account-trading technology business from Legg Mason Inc. in the latest deal announced between the two companies.
Citi, the largest sponsor of separately managed accounts, said the transaction gives the New York financial giant the ability to customize such portfolios for investors under its global wealth management group.
The separately managed account technology also will allow Citi to combine SMAs, mutual funds and exchange-traded funds into a single statement as these unified managed accounts become more popular among clients. In the past, Legg handled part of that function for Citi.
The deal's financial terms were not disclosed.
Legg Mason will continue to oversee separately managed account portfolios for Citi, valued around $61 billion as of Dec. 31. The Baltimore asset manager created Legg Mason Private Portfolio Group last year to manage SMAs. SMAs are investments of stocks, bonds, cash and other securities overseen by a money manager. Unlike a mutual fund, though, a SMA investor owns individual securities and a money manager makes purchases or sells on behalf of a client as opposed to the fund. And SMA investors can modify their portfolios based on personal and financial needs.
In late 2005, Legg swapped its brokerage operation for Citigroup's money management unit, including separately managed accounts and the account-trading technology business. Legg's brokerage unit was integrated into Citi's Smith Barney.
Roger Paradiso, president and chief investment officer of Legg Mason Private Portfolio Group, and Michael Scotto, chief investment strategist, as well as an unspecified number of people on their team will join Citi as part of yesterday's deal. They are based in New York and Stamford, Conn.
Legg spokesman Mary Athridge said it makes sense for the company to relinquish the account-trading technology associated with SMAs as more brokerages move to customize such portfolios for their investors in-house. Legg decided it was better for the company to focus on broad money management services.
"We believe ... selling the overlay technology back to Smith Barney allows us to continue to service Smith Barney and their clients in the most efficient way," Legg Chief Executive Officer Mark R. Fetting said in a statement. "As important, we can introduce more flexible solutions for all our distribution partners in this very dynamic SMA market place."
Legg shares rose 23 cents to close at $70.23 yesterday on the New York Stock Exchange. Shares of Citi rose 21 cents to close at $24.95.
hanah.cho@baltsun.com