Legg Mason Inc.
) reported a fall in its assets under management (AUM) as of Apr
30, 2014, as compared with the prior month. Preliminary month-end
AUM came in at $673.2 billion, down 4.1% from the prior month.
Notably, effective Apr 1, 2014, some of the client assets earlier
reported as AUM have been reclassified as Assets Under Advisement
(AUA). Therefore, giving effect to this, $12.4 billion of AUA has
been excluded for the month of April.
The decline over the prior month mainly resulted from equity and
liquidity outflows following earlier reported redemptions. However,
liquidity inflows and favorable markets, which included about $800
million of positive foreign exchange was on the positive side.
Legg Mason's equity AUM as of April-end marginally decreased 1.1%
over the prior month to $184.3 billion. Moreover, fixed income AUM
declined 1.9% from the prior month to $358.1 billion.
The fall in fixed income as well as equity AUM resulted in
long-term AUM of $542.4 billion. The figure marked a decline of
1.7% from the prior month. Liquid assets, which are convertible
into cash, plunged around 12.9% to $130.8 billion.
Among other investment managers,
) announced a marginal dip of 1.0% over the prior month in its
preliminary month-end AUM for Apr 2014, which came in at $779.4
Franklin Resources Inc.
) declared preliminary AUM of $895.4 billion by its subsidiaries as
of Apr 30, 2014, which exhibited around 1.0% rise from $886.9
billion as of Mar 31, 2014.
We believe Legg Mason has the potential to outperform its peers in
the long run, given its diversified product mix and leverage to the
changing market demography. Moreover, a significant rebound in
equity markets in the coming quarters would be a catalyst.
However, in the near term, asset outflows might remain a
significant headwind. Nevertheless, owing to the company's
restructuring initiatives and aggressive cost cuts, we expect
operating efficiencies to improve and dividend payments to keep up
investors' confidence in the stock.
Currently, Legg Mason carries a Zacks Rank #3 (Hold). A
better-ranked asset manager worth consideration is
Affiliated Managers Group Inc.
) with a Zacks Rank #1 (Strong Buy).
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