Independent Firms Will Boost Market Share as Fund Industry Tackles Fundamental Change, Says Jefferies Putnam Lovell Report on the Future of Asset Management

Independent and quoted money management firms, both traditional
and alternative, will capture 33% of all assets under management by
2012, up from 24% today, and will be beneficiaries of an historic
shift from the retirement mainstay upon which the global fund industry
was built, according to Putnam Lovell, the division of Jefferies &
Company, Inc. focused on the asset management and financial technology
industries.

Commercial banks, insurance companies and investment banks
controlled the global money management business in its infancy.
Increasingly, they will find it more lucrative to assemble
unaffiliated products and play the role of professional buyers rather
than fight a losing battle for market share with independent managers.
Captive fund management operations of banks and insurers will agitate
for more autonomy and spinoffs will become more common, particularly
in Europe and Japan, according to the Jefferies Putnam Lovell report,
After the Belle Epoque, the Future of Fund Management.

Traditional active management, long-only stock and bond portfolios
charging asset-based fees, will contribute less than half of total
industry revenue by 2012, down from about 69% in 2006. More than 50%
of revenue will come from performance fees, alternative investments
rapidly becoming mainstream, and proliferating long-short extension
strategies.

"The days of relying on tax advantages and government subsidies to
spur retirement savings and growth in the fund industry are over,"
said Ben Phillips, managing director and head of strategic analysis at
Jefferies Putnam Lovell, and author of the new report. "Individual
investors, Asia, and sovereign wealth funds will be major sources of
new business in the next five years. Yield rather than asset
accumulation will increasingly be the focus of investors, boosting
demand for a new generation of products."

More than ever in fund management, performance, not capital or
brand, will separate the winners and losers. But investor inertia is
fading and the price for adjusting slowly to this new environment will
rise dramatically, according to the Jefferies Putnam Lovell report.

Forecasts in the Jefferies Putnam Lovell report include:

-- ETFs and other less-expensive products will increasingly
endanger active managers offering closet index performance at
higher fees.

-- Hedge funds, now in more challenging markets, will be more
easily distinguishable. Institutional-grade firms generating
strong performance in all market conditions will gain further
market share at the expense of lesser competitors. Roughly 20%
of the current total, approximately 2,000 funds, will
disappear in the next five years.

-- Firms primarily reliant on long-only mutual funds will be
under the most severe pressure to reinvent themselves or face
dwindling prospects.

-- Sub-advisors will capture increasing share, in particular in
the US mutual fund segment where they will control 20% of the
market by 2012.

-- Demand for performance fees and customized benchmarks are on
the rise, from both institutional and individual investors
willing only to pay for outperformance.

"Fund firms that anticipate and adjust to these new challenges
will enjoy a bright future, growing their businesses at the expense of
those unable to let go of a rich epoch that´s rapidly fading,"
Phillips said.

About Jefferies Putnam Lovell

Putnam Lovell, the division of Jefferies & Company, Inc. focused
on the financial services industry, offers a wide range of corporate
advisory services, including mergers and acquisitions advice and
capital raising. Putnam Lovell´s global client base is comprised of
diversified financial services firms, institutional and mutual fund
managers, alternative investment managers, banks, broker-dealers,
insurers, and financial technology firms. Putnam Lovell was founded in
1987 and operates from offices in New York, San Francisco, Boston, and
London. Since July 2007, Putnam Lovell has been a division of
Jefferies & Company, Inc., the principal operating subsidiary of
Jefferies Group, Inc. (NYSE: JEF). For more information please visit
www.putnamlovell.com.

About Jefferies

Jefferies, a global investment bank and institutional securities
firm, has served growing and mid-sized companies and their investors
for 45 years. Headquartered in New York, with more than 25 offices
around the world, Jefferies provides clients with capital markets and
financial advisory services, institutional brokerage, securities
research and asset management. The firm is a leading provider of trade
execution in equity, high yield, convertible and international
securities for institutional investors and high net worth individuals.
Jefferies & Company, Inc. is the principal operating subsidiary of
Jefferies Group, Inc. (NYSE: JEF; www.jefferies.com)