Legg Mason, Inc. Earnings Call Nuggets: Distribution Initiatives, Expenses
Michael Kim – Sandler O’Neill: First, can you just talk a little bit about some of your initiatives on the distribution side to work with your affiliates to help them build out their retail footprint, so aside from kind of ongoing closed-end fund offerings, what are some of the specific ways that you’re maybe able to leverage your capabilities?
Mark R. Fetting – Chairman and CEO: Yeah. Michael, thank you. I’d really kind of go affiliate by affiliate if I can starting with Western. Western has a very good and broad product line in both the U.S. and international. We work closely with them on existing products like the top ranked Core – Core Plus funds in the Western family as well as specific funds in international markets like Japan, we work closely with them to launch new funds and to work hard in expanding their share. So, if you take the Core and Core Plus category this new initiative is to add share classes to those existing funds and make them more available to financial intermediaries regardless of how you want to buy the fund, so that’s the key one. As it relates to ClearBridge on the equity side, this income solutions suite of products is getting a lot of momentum both at the fund side, but also the separate account. There is a bit of a resurgence going on in intermediary land around retail separate accounts that are really conducive to this kind of market environment in terms of investors coming back. Permal we are working with them on this 1099 fund which will be quite an innovation, 1099 benefit to the investor not K-1 and with their strong track record and LMG distribution, one of our distribution partners kind of referenced in meeting last week that’s a powerful combination. Brandywine what we’ve done on a closed-end side, most recently, is indicative of leveraging their global capability as you could see I could go on. With Royce, we work with them on a kind of a niche basis where they have legacy coverage in, let’s say, certain areas like the RA community where we supplement what they’ve done historically, but in the current traditional FA mutual fund sweep program we’ve been able to add some new momentum. Obviously, seed is important and our ability to work with the affiliates and launch new products and where appropriate to put some seed capital to get them going I think has been mutually beneficial.
Michael Kim – Sandler O’Neill: Then second just given the level of excess cash that you talked about on the balance sheet, how much of an issue is the money market fund business when it comes to the ratings agencies, and if it is somewhat of an issue, if you will, and just given kind of ongoing regulatory scrutiny of money market funds and fee waivers, do you consider that a core business for you or how do you think about it from a strategic standpoint going forward?
Mark R. Fetting – Chairman and CEO: Just in terms of the money fund business broadly, given there’s a lot of discourse on this, let me say that we believe money funds have been strengthened considerably coming out of the lessons learned from the crisis of ’07, ’08. They were stress tested in Europe in the second half of ’11. We believe and support the industry’s view that what we have now should only be changed with careful cost-benefit analysis in terms of the incremental cost to key stakeholders, like the issuers, like the investors, retail and institutional, against the benefit of even more risk control in a systemic situation. Having said that, we have said, we have optionality. If some of these measures on an extreme basis are enacted, it might cause us to reconsider, but we like the business, it’s additive, and then Pete can speak specifically to the conversations with rating agencies.
Peter H. Nachtwey – CFO: Michael, on the rating agency side, we certainly have discussions about this along with the host of other things with the agencies. Our focus there has been much more on kind of risk management and how we’ve improved that, both at the Legg Mason level and the Western Asset level. So, the dialog is much more about risk management as opposed to capital set asides for that business.
Michael Carrier – Deutsche Bank: Just on the expense side, so if we look at it on an adjusted basis it looks like – and this should be adjusting for the mark-to-market comp, the closed-end fund launch you had around (5.35) run rate or so. So, when I think about that going forward and the focus on some of the new initiatives we’ve kind of been for the past year or two on the streamlining. So, when I think going forward in terms of investments spend on your core kind of expense run rate like what should we be expecting at this point given some of the growth initiatives offset by still a challenging environment?
Mark R. Fetting – Chairman and CEO: Yeah, I think, that’s really the key of acknowledging that the streamlining is in the rearview mirror, but continued vigilance against cost and improving margin is still a priority. We want to do that by really focusing on growing and leveraging the investments that we have at hand. So, what we see is organic growth as you see kind of the pipeline has probably never been as strong, certainly, since over the last several years across most of the managers. The ability to leverage that where appropriate through retail where we get the incremental operating leverage is valuable. So, we see subject to delivery and (improving) on the – flow improvements and getting into positive flows, getting the mix continued to improve that we can then leverage and we can post improved margin with minimal incremental investment in some of these key distribution and corporate areas. Pete?
Peter H. Nachtwey – CFO: I’d echo, Michael, what Mark just said. We think with the streamlining in the rearview mirror that we’ve got a very leverageable model at both corporate where we don’t need to increase expenses there to any significant degree to take on additional AUM, and then a pretty big chunk of our internal distribution costs are fixed or semi-fixed. So, I think, we’ve said in the past for every dollar of revenue share we get from our affiliates we’ll be taking over $0.90 on those dollars to the bottom-line going forward.
Mark R. Fetting – Chairman and CEO: Then just as a follow-up, you mentioned the pipeline for Western and you mentioned few of the items in April, just on the equity side; 1 billion redemption. I think you mentioned some kind of ins and outs on the fixed income side. Just any granularity on that, in April like just because we kind of have the components in terms of the pipeline in the equity side, but it sounded like the fixed income ins and outs in April were a little blurry. So any color there?
Mark R. Fetting – Chairman and CEO: I guess what I was trying to do is allow you to, on the one hand step back, see kind of the forest from the trees. The forest is continued improvement across the flow story, particularly in fixed income, particularly in alternatives and in some areas of equity. However there will continue to be the trees, the months-to-months, we had terrific March, as you can back into when we affirm today. On the other hand we do see a couple of known redemptions coming in April, but that doesn’t offset our encouragement about the overall and it’s pipeline numbers that allow for that; Western at $4 billion, Permal at approximately $400 million, ClearBridge at $600 million, Brandywine at $1.2 billion. These are one business that’s not yet funded. Then if you look at the pipeline, to see RFP pipeline at Western for example, that volume is up 30% sequentially quarter-over-quarter and up 40% year-over-year, and it does registering approximately $12 billion of potential business. Now all of these things are very encouraging. On the other hand, we do reference, this continue to be a choppy market. You’ve heard that from other firms reporting in the past couple weeks. But what we see and are most confident about is improved performance across the board, real momentum in activity at (indiscernible) and getting back to normalized win rates in most of our managers. So, this is all subject to work to be done, we are net, net encouraged.