Last week, Baltimore-based
Legg Mason Inc.
) reported a slight rise in its assets under management (AUM) in
August 2012 compared with the prior month, following resurgence
from the last two months.
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Preliminary month-end AUM came in at $639.2 billion, up 0.5%
compared with the last month. Equity AUM and liquidity AUM recorded
augmentations, while fixed income AUM remained stable. AUM reported
in August includes $1.1 billion redemption from enhanced cash, low
fee directive within fixed income.
Legg Mason's equity AUM as of August 2012 inched up 1.1% from the
prior month to $151.2 billion while fixed income AUM remained
almost in line with the prior month at $364.8 billion.
The upside in equity AUM resulted in long-term AUM of $516.0
billion, reflecting a 0.3% rise against the prior month. Moreover,
liquid assets, which are convertible into cash, ascended 1.6% to
$123.2 billion from $121.3 billion at July 2012-end.
On a quarterly basis, as of June 30, 2012, Legg Mason's AUM was
$631.8 billion, down 1.8% sequentially from $643.3 billion, driven
by dispositions of $4.6 billion, market depreciation of $4.3 and
client outflows of $2.6 billion. Fixed income represented 57% of
consolidated AUM as of June 30, 2012, liquidity represented 19% and
equity comprised 24%.
During the quarter, fixed income inflows were about $100 million
and liquidity inflows were $1.2 billion. However, equity outflows
were $3.9 billion. Average AUM was $635.5 billion compared with
$670.8 billion in the prior quarter.
One of Legg Mason's peers -
) also reported a 1.5% rise in its preliminary month-end AUM for
the month of August. The company's AUM for the reported month was
$669.7 billion compared with $659.5 billion at the end of July. The
escalation in Invesco's AUM was a result of encouraging market
returns and total net inflows. In addition, favorable foreign
exchange of $1.7 billion was recorded.
Another peer -
Franklin Resources Inc.
) also declared an increase in its preliminary month-end AUM for
August 2012. The company reported preliminary AUM of $731.0 billion
for its subsidiaries, as of August 31, 2012, signifying a rise of
1.7% from $718.7 billion as of July 31, 2012.
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. However, in the near term, assets
outflows will remain a significant headwind. Yet, owing to the
restructuring initiatives and the cost-cutting measures, we expect
operating efficiencies to improve, and dividend payments to
continue to inspire investors' confidence in the stock.
Legg Mason currently retains a Zacks #5 Rank, which translates into
a short-term Strong Sell rating.