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September 28, 2006

Better Relationships Key, Says ClearBridge Chief

By Editorial Staff

Also in this article

  • Better Relationships Key, Says ClearBridge Chief
  • Page 2

The consolidation of three desks into one called ClearBridge Advisors has resulted in a primarily research driven desk, one that trades all kinds of stocks and emphasizes asset management. That's according to Lisa Utasi's new boss, Patrick Collier.

Collier, a former head of trading and partner with Hygrove Partners and Centurion Investment Group, is head of equity trading at ClearBridge Advisors, which has some $115 billion in assets under management. ClearBridge Advisors' chief executive officer is former Fidelity Investments Executive Brian Posner, one of the co-founders of Hygrove Partners. At Hygrove, Posner worked closely with Collier.

"At the new organization we operate on a unified front. All traders, analysts and portfolio managers function on a single platform," Collier says. This is part of a one company, one vision philosophy, he says. Also, the new organization will no longer have traders, analysts and portfolio managers as a part of three separate organizations.

"When you bring three desks together," Collier says, "you are able to improve the quality of your relationships with OMS providers, portfolio managers and broker-dealers." This means halving the number of brokerages. Why the changes?

Legg Mason stresses the asset management business, while the Citigroup desk was part of a banking platform.

"It helps relationships with the sellside and the relationships with the OMS and the portfolio managers internally," Collier says.

The average commission rate on the ClearBridge Advisors desk is 3.7 cents a share for the first six months of the year, although some trades are executed for a penny or less.

"We use a barbell approach when looking at commissions with an emphasis on high touch and low touch," he says. "The high-touch execution refers to the relationship business including three- and five-5 cents per share payment for research and capital commitment," Collier says. "Rates on the electronic, low-touch business, usually range between a half cent and 2 cents a share," he adds."By incorporating the barbell approach you gain additional access to liquidity through capital commitment." The barbell approach, he notes, also allows a desk to enjoy the benefits of both kinds of business. "And you still have the ability to go to the algos and the ECNs for low-touch business and lower execution rates," Collier notes.

ClearBridge Advisors trades for Legg Mason Partner funds. These investment companies are running money for both institutional and retail business. Also, the firm also has separated managed business and a share of qualified money, including variable annuities. Collier says his top priority is leveraging the new trading platform by reducing the number of counter parties. ClearBridge now has 12 traders. The desk also includes 18 research analysts and 14 portfolio manager teams.

Any other changes because of consolidation?

Collier, a trading vet with 16 years of experience, says LatentZero will be used as the OMS for the entire desk.

He adds that a successful desk must be able to mix high- and low-touch trading. Collier affirms that the trend is toward more low-touch trades. Nevertheless, despite the relentless march of technology with its promise of lower costs, there will always be a need for a certain number of high-touch trades, Collier says.