Baltimore-based
Legg Mason Inc.
(
LM
) experienced a slight rise in its in March 2012 assets under
management (AUM) on a sequential basis, driven by growth in
liquidity assets. This was preceded by a rise in both February and
January 2012 AUM.
Preliminary month-end AUM came in at $643 billion, up 0.8% from
the prior month. Compared with the prior month, the company
witnessed a growth in liquidity AUM and equity AUM which were
partly offset by a fall in fixed income AUM.
Legg Mason's equity AUM as of March inched up 0.3% from the
prior month to $163.4 billion, while fixed income AUM moved down
0.6% to $356.1 billion.
The decrease in fixed income AUM resulted in long-term AUM of
$519.5billion, reflecting a 0.3% fall against the prior month.
However, liquidity assets, which are convertible into cash, edged
up 6.0% to $123.8 billion from $116.8 billion at the end of
February 2012.
However, compared with the prior-year quarter, Legg Mason's AUM
reported a 5% decrease from $677.6 billion.
On a quarterly basis, as of December 31, 2011, Legg Mason's AUM
was $627.0 billion, up 2.5% sequentially from $611.8 billion,
driven by market appreciation, partially offset by net client
outflows of $1.3 billion and dispositions of $1.1 billion.
On a year-over-year basis, AUM was down 7% from $671.8 billion.
Fixed income represented 56% of consolidated AUM as of December 31,
2011, while liquidity and equity represented 19% and 25%,
respectively.
During the quarter, fixed income outflows at Legg Mason were
approximately $7.1 billion and equity outflows were $4.9 billion.
However, liquidity inflows were $10.7 billion. Average AUM was $622
billion, down 3.3% from $643.3 billion in the prior quarter and
7.5% from $672.4 billion in the year-ago quarter.
Peer Performance
One of Legg Mason's peers -
Invesco Ltd.
(
IVZ
) - also reported a 0.8% rise in its preliminary month-end AUM for
March 2012. The company's AUM for the reported month was $672.8
billion compared with $667.6 billion at the end of February
2012.
Invesco's March AUM was mainly rewarded from favorable market
returns and enhanced long-term net inflows. However, foreign
exchange led to a $0.9 billion decline in the AUM during the month
under review.
Another peer -
Franklin Resources Inc.
(
BEN
) - declared preliminary assets under management (AUM) of $725.7
billion by its subsidiaries, as of March 2012, reflecting a slight
fall from $727.4 billion as of February 2012 and an increase of
3.2% from $703.5 billion as of March 2011.
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 demographics in the market. However, in the near term,
assets outflows will remain a significant headwind. Yet, with
restructuring initiatives and cost-cutting measures, we expect
operating leverage to improve, and dividend payments to continue
inspiring investors' confidence in the stock.
The shares of Legg Mason currently retain a Zacks #2 Rank, which
translates into a short-term Buy rating. However, considering the
fundamentals, we have a long-term Neutral recommendation on the
stock.
FRANKLIN RESOUR (
BEN
): Free Stock Analysis Report
INVESCO LTD (
IVZ
): Free Stock Analysis Report
LEGG MASON INC (
LM
): Free Stock Analysis Report
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