Legg Mason Inc.
) reported a fall in its assets under management (AUM) as of Aug
31, 2013, compared with the prior month. Preliminary month-end
AUM came in at $644.5 billion, down 1.8% from July-end.
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The decline over the prior month mainly resulted from unfavorable
markets and outflows in both equity and fixed income. Further,
AUM decreased by about $1.0 billion due to the negative effects
of foreign exchange.
Legg Mason's equity AUM as of August-end declined 3.9% from the
prior month to $163.5 billion. The decline resulted from $1.3
billion disposition of a non-core affiliate.
Moreover, fixed income AUM inched down 1.6% compared with the
prior month to $347.0 billion, driven by ongoing tax-free
redemptions and the global sovereign mandate.
The drop in fixed income and equity AUM resulted in a long-term
AUM of $510.5 billion, reflecting a 2.3% decrease against the
prior month. Liquid assets, which are convertible into cash,
surged slightly to $134.0 billion.
Among other investment managers,
) announced a 3.4% fall in its preliminary month-end AUM for Aug
2013, which stood at $719.7 billion. Another firm -
Franklin Resources Inc.
) declared preliminary AUM of $817.3 billion by its subsidiaries
for the month of Aug 2013, reflecting a decrease of 2.0% over the
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 act as a
However, in the near term, asset outflows will remain a
significant headwind. Yet, owing to the restructuring initiatives
and cost-cutting measures, we expect operating efficiencies to
improve for Legg Mason and dividend payments to continue to
inspire investors' confidence in the stock.
Currently, Legg Mason carries a Zacks Rank #3 (Hold). Some better
performing asset managers include
Affiliated Managers Group Inc.
) with a Zacks Rank #2 (Buy).