You can never accuse the team of Nelson Peltz
, head of Trian Partners
, of never speaking their minds. Nor can you doubt the confidence they have in their investing strategy.
Or in this case, writing what they feel, according to an investor letter obtained by ValueWalk
In the letter, Trian executives argue that Legg Mason's
] "shares declined in the second quarter as a result of negative investor sentiment regarding the impact of a rising interest rate environment for Legg Mason’s two fixed income managers: Western Asset Management and Brandywine Global."
Moreover, the Trian execs write, "higher interest rates will likely result in a modest decline in fixed income AUM – however, we believe this impact will be manageable. First, both Western and Brandywine are global managers and the increase in US interest rates affects only a portion of their business. "
Moreover, they write "with respect to future fund flows, both Western and Brandywine are more institutionally focused (institutions typically maintain constant weightings of fixed income assets and do not attempt to call market cycles) and have a greater credit-oriented focus than competitors such as PIMCO
] which should help limit any flow pressure."
In the letter, Trian execs also touted the recent appointment of three new directors to Legg's board, Dennis Kass as non-executive chairman
, and John Murphy
and John Myers
as board directors
The moves are emblematic of Trian's strategy for investing. First they buy enough shares in the company to get spots on the board (Peltz is also on Legg's board and chief executive Joe Sullivan
could be considered a Trian ally). Then, Trian uses the board positions to affect change in the company's management. Finally, once change has occurred, tout the company's improved value and shop for a sale.
Which can only lead industry observers to wonder, what's next for Legg?
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