Legg Mason is taking an 83% stake in Clarion Partners, marking its entrance into the direct real estate market.
The Baltimore-based investment firm, traditionally known as an equities and fixed income shop, will pay $585m for the majority holding.
New York-based Clarion Partners, which manages around $40bn in unlisted real estate investments in the US as well as Brazil and Mexico, will become Legg Mason’s primary real estate affiliate.
The firm’s previous majority partner, Lightyear Capital, will sell its entire ownership, with Clarion Partners management keeping 17% of outstanding equity.
Steve Furnary, chairman and chief executive of Clarion Partners, will continue in his current role.
He said: “We remain investors in our business, and the partnership gives us investing and operating autonomy so that we can continue to serve our clients in the same way we always have.”
The deal is expected to close in the second quarter of the year.
Joe Sullivan, chairman and chief executive of Legg Mason, said Clarion Partners brings an “important alternative asset class” to its portfolio of investment managers.
“Whether they seek growth, capital preservation or income, we are further able to offer our clients investments with attractive solutions,” he said.
Legg Mason had $691bn in assets under management at the end of November.
Last July, Legg Mason bought Australian company RARE Infrastructure, which manages $7.6bn (€7bn) in listed infrastructure investments.
As reported this month, Legg Mason has been steadily expanding its offerings as asset flows have shifted from active equity and fixed income strategies to passive strategies and low-cost vehicles such as exchange-traded funds (ETFs). Its investment units include fixed income manager Western Asset Management and equity managers such as ClearBridge Advisors and Royce & Associates, as well as international equity specialist Martin Currie and QS Investors.
The company also owns hedge fund-of-funds manager Permal Group. Affiliates operate independently under revenue-sharing agreements with the corporate parent.