US fund management group Legg Mason has bought an 80 per cent stake in Permal, a French-owned fund of hedge funds manager whose clients are ...

US fund management group Legg Mason has bought an 80 per cent stake in Permal, a French-owned fund of hedge funds manager whose clients are mostly high net worth individuals. Legg Mason is paying $800 million for the stake.

Under the deal, it can purchase the remaining 20 per cent over the next four years to give a total price of between $960 million and $1.39 billion, depending on Permal's performance.

Permal is one of the oldest funds of funds managers. It is owned by Sequana Capital, formerly known as Worms & Cie. Its earnings are believed to have been growing at more than 20 per cent.

The deal follows the announcement that Legg Mason and Citigroup have agreed a $3.7 billion asset swap that will allow both companies largely to separate the manufacturing of asset management products from their distribution.

The deal involves Citigroup selling the bulk of its asset management business in return for a 14 per cent stake in Legg Mason, the Baltimore group's private client brokerage and $550 million in cash.

The two acquisitions will turn Legg Mason into a pure fund manager, ranking fifth in the world in terms of assets with $830 billion under management.