Legg Mason Inc. is cutting 8 percent of its corporate work force, or about 200 people, as the Baltimore money manager reduces costs to help offset a volatile market and its poor financial performance, executives said yesterday.
About 99 employees at Legg's Light Street headquarters and Owings Mills office will be affected in the Baltimore region, with the remaining workers coming from offices mostly in the U.S., including Stamford, Conn., San Francisco and New York.
Legg has about 4,200 employees worldwide, including 1,000 workers in the Baltimore area. Executives said the job cuts took place immediately.
In a memo to employees late Thursday, Legg Chief Executive Officer Mark R. Fetting said the company "made the very difficult decision to implement reductions in staff across Legg Mason, an unfortunate but necessary step in achieving sustainable cost savings in a period of unprecedented market turmoil."
The job cuts affect workers in business operations who perform corporate functions and provide support to investment affiliates, such as legal, finance, technology, marketing and fund administration.
"Next week will feel different at Legg Mason," Fetting added. "But we must stay clearly focused on the business at hand and committed to performing at the highest level."
Legg's work force reduction comes at a difficult time for the mutual fund industry, which has been watching the value of its assets crater in a recession. In turn, spooked investors have been pulling record amounts from their mutual funds and other investments.
Competitors such as Fidelity Investments, AllianceBernstein and Janus Capital Group also have announced job cuts in recent months in response to dire market conditions. Fidelity, for instance, is cutting 3,000 workers by the end of March.
Legg's assets under management fell nearly 9 percent to $841.9 billion at the end of September, from $922.8 billion in June. While the decline was mostly due to market losses, Legg clients pulled $20 billion from its funds in the July-September quarter.
Besides market losses, Legg has also been hurt by exposure to troubled asset-backed securities in some of its money market funds. Costs to protect its money funds against potential losses have weighed down its profit.
Legg's stock has dropped nearly 75 percent since the beginning of the year. Shares gained $1.70, or 10.3 percent, to close at $18.15 yesterday.
The company has reported three consecutive quarterly losses. Earlier this week, Legg said it expects to take a $523 million charge in the quarter ending Dec. 31 to provide more support for four money market funds.
In late October, Legg hinted at corporate job reductions when the company announced plans to cut $120 million in corporate expenses by the end of its fiscal year on March 31. At that time, Fetting said the cuts would be "surgical" rather than an across-the-board reduction.
"We believe that this reduction in staff will have no effect on our ability to serve clients, work with business partners and compete for assets around the world," spokeswoman Mary Athridge said yesterday.
Athridge said the layoffs will not change plans to move the company's downtown headquarters to a new tower in Harbor East in 2009.
Affected employees were to be told of their dismissal by the end of yesterday, according to the memo. Departing employees will receive six months of subsidized health care, severance based on years of service, a percentage of last year's bonus and outplacement services, Legg said.
Yesterday's job cuts were the largest single work force reduction at Legg since 2005, when about 300 employees were laid off during the integration of Citigroup's asset management business. Job cuts involved duplicate operations and staff redundancies.
Legg swapped its brokerage unit for Citigroup's asset management business in a $3.7 billion deal.
Separately, Legg's subsidiary, Legg Mason Capital Management, run by money manager Bill Miller, cut a third of its 147-person staff in late October. The company's affiliates are making decisions about cost cutting independently, the company said.
legg mason inc.
Employees: 4,220, including 1,000 in the Baltimore area
Job cuts: about 200, including 99 in the area
Source: Legg Mason