Key facts
- WAMCO has seen $120 billion in outflows over the past year.
- Regulatory investigations into former co-Chief Investment Officer Ken Leech for alleged fraud sparked client withdrawals.
- Franklin Templeton has reorganized leadership, appointing Thomas J. Gahan as CEO and Michael Buchanan as CIO.
- WAMCO is losing its subadvisory role for the Russell Strategic Bond Fund and six SEI mutual funds.
- Franklin is integrating WAMCO's non-investment functions and implementing cost-cutting measures.
Franklin Templeton's Western Asset Management Co. (WAMCO) is navigating a critical period following substantial investor outflows and heightened regulatory scrutiny. Over the past year, the firm has experienced $120 billion in redemptions, a trend that intensified after allegations of 'cherry-picking' fraud surfaced against former co-Chief Investment Officer Ken Leech. This has led major institutional clients, including the California State Teachers’ Retirement System (CalSTRS) and the London Borough of Enfield, to withdraw their assets due to governance concerns.
In response, Franklin Templeton has undertaken a significant restructuring. In December 2024, Thomas J. Gahan was appointed CEO of WAMCO, with Michael Buchanan becoming the sole Chief Investment Officer, aiming to restore integrity and stability. The parent company is also accelerating the integration of WAMCO's non-investment functions into its own operations to centralize risk management and improve efficiency. This includes a planned 3% workforce reduction, targeting non-investment roles to save an estimated $200–$250 million by fiscal 2026.
The fallout continues to impact WAMCO's business relationships. Russell Investment Management is winding down WAMCO's role as a subadviser for its $2.2 billion Strategic Bond Fund, with a formal termination expected by year-end. Similarly, SEI Investments Management Group is removing Wamco as subadviser for six of its mutual funds. The Russell fund, in particular, has faced performance struggles, with an average annual loss of 0.5% over the past five years.
Despite these challenges, WAMCO's remaining assets stand at $260 billion, with the firm managing a total of $377 billion at the end of last month. Market gains and inflows into cash-management products have partially offset long-term outflows. Franklin Templeton's strategy focuses on retaining key investment personnel while overhauling governance and compliance measures to prevent future scandals, though the ultimate outcome of ongoing investigations by the SEC, CFTC, and DOJ remains uncertain.