Legg Mason's structure is misunderstood by the market. Legg Mason has an affiliate model. They own 100% of their affiliates, which are investment managers such as Permal, Western Asset Management, and Royce.
This quote highlights a common challenge in the investment management industry: the market’s misinterpretation of a company's organizational structure. Legg Mason employs an affiliate model, where their subsidiaries or affiliated firms operate as independent entities but are wholly owned by the parent company. Such a structure can often be misunderstood by investors and analysts, leading to mispricing or undervaluation. When a parent company owns its affiliates outright, it might resemble a conglomerate with multiple autonomous units, each specializing in different investment approaches or markets. This setup allows for operational flexibility, specialization, and risk diversification, as each affiliate can pursue its unique investment strategies without interference from others within the corporate family.
