On Friday, Baltimore-based
Legg Mason Inc.
) reported a slight decline in its assets under management (AUM)
as of Dec 31, 2012. However, the company reported a rise in the
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Preliminary quarter-end AUM came in at $647.9 billion, down 0.4%
compared with the prior quarter. Equity AUM and Fixed Income AUM
were down in the quarter under review, though liquidity AUM
Legg Mason's equity AUM inched down 5.6% from the prior quarter
to $144.8 billion while fixed income AUM declined 0.7% compared
with the prior quarter to $366.7 billion. Notably, the reported
quarter's fixed income AUM includes $2.4 billion redemption from
a major state pension client.
The fall in equity and fixed income AUM resulted in long-term AUM
of $511.5 billion, reflecting a 2.2% decline against the prior
quarter. However, liquid assets, which are convertible into cash,
surged 6.6% to $136.4 billion.
One of Legg Mason's peers,
), announced a marginal 0.6% rise in its preliminary month-end
AUM for Dec 2012. The AUM for the month came in at $687.7 billion
compared with $683.8 billion at the end of November. Favorable
market returns and positive foreign exchange drove the increase.
Another peer -
Franklin Resources Inc.
) - declared preliminary AUM of $781.8 billion by its
subsidiaries for the month of December 2012. The company's
results witnessed a rise of 1.7% from $768.8 billion as of Nov
30, 2012. Moreover, it increased 16.6% from $670.3 billion as of
Dec 31, 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 market demography. 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 and dividend payments to
continue to inspire investors' confidence in the stock.
Legg Mason currently retains a Zacks Rank #3 (Hold). Considering
the fundamentals, we also maintain our 'Neutral' recommendation
on the stock.