Legg Mason Inc.
) experienced a slight rise in its assets under management (AUM) in
July 2012 compared with the prior month, following resurgence from
the last month. However, in May 2012, the company's AUM skidded.
Preliminary month-end AUM came in at $635.8 billion, up 0.6%
compared with the last month. Growth in fixed income AUM and
liquidity AUM was recorded, though partially offset by a decline in
equity AUM. AUM reported in July includes transfer of $2 billion of
liquidity assets to Morgan Stanley Smith Barney along with a $2
billion redemption from an enhanced liquidity, low fee directive
within fixed income.
Legg Mason's equity AUM as of July 2012 inched down 1% from the
prior month to $149.6 billion while fixed income AUM surged 1.2% to
The upside in fixed income AUM, partly offset by a fall in equity,
resulted in long-term AUM of $514.5 billion, reflecting a 0.5% rise
against the prior month. Moreover, liquid assets, which are
convertible into cash, ascended 1% to $121.3 billion from $120.1
billion at June 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 2% rise in its preliminary month-end AUM for the
month of July. The company's AUM for the reported month was $659.5
billion compared with $646.6 billion at the end of June 2012. The
increase in Invesco's AUM resulted from encouraging market returns,
long-term net inflows and favorable foreign exchange.
Franklin Resources Inc.
), also declared an increase in its preliminary month-end AUM for
July 2012. The company reported preliminary AUM of $718.7 billion
for its subsidiaries, as of July 31, 2012, signifying a rise of
1.6% from $707.1 billion as of June 30, 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 with 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.
FRANKLIN RESOUR (BEN): Free Stock Analysis
INVESCO LTD (IVZ): Free Stock Analysis Report
LEGG MASON INC (LM): Free Stock Analysis Report
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Legg Mason currently retains a Zacks #3 Rank, which translates into
a short-term Hold rating. Considering the fundamentals, we also
maintain a long-term Neutral recommendation on the stock.