Legg Mason Inc.
) experienced a slight rise in its assets under management (AUM) in
June 2012 compared with the prior month, recording resurgence from
the first two months of the current quarter. Both in May and April
2012, the company witnessed a fall in AUM.
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Preliminary month-end AUM came in at $631.8 billion, up 0.7%
compared with the last month. Growth in fixed income AUM and equity
AUM was recorded, though partially offset by a decline in liquidity
Legg Mason's equity AUM as of June inched up 3.3% from the prior
month to $151.1 billion and fixed income AUM crept up slightly to
The upside in equity AUM coupled with a rise in fixed income,
resulted in long-term AUM of $511.7 billion, reflecting a 1.5% rise
against the prior month. However, liquid assets, which are
convertible into cash, plummeted 2.5% to $120.1 billion from $123.2
billion at May 2012-end.
On a quarterly basis, as of March 31, 2012, Legg Mason's AUM was
$643.3 billion, up 2.6% sequentially from $627.0 billion, driven by
market appreciation of $24.4 billion, partially offset by net
client outflows of $4.9 billion and dispositions of $3.2 billion.
Fixed income represented 55% of consolidated AUM as of March 31,
2012, liquidity represented 19% and equity comprised 26%.
During the quarter, fixed income outflows were approximately $2.8
billion and equity outflows were $4.9 billion. However, liquidity
inflows were $2.8 billion. Average AUM was $634.9 billion, up 2.1%
from $622.0 billion in the prior quarter.
One of Legg Mason's peers -
) also reported a 2.3% rise in its preliminary month-end AUM for
the month of June. The company's AUM for the reported month was
$646.6 billion compared with $632.1 billion at the end of May 2012.
The increase in Invesco's AUM was a result of encouraging market
returns, long-term net inflows and favorable foreign exchange worth
$2.3 billion. However, the active net long-term flows remained
Another peer -
Franklin Resources Inc.
) also declared an increase in its preliminary month-end AUM for
June 2012. The company reported preliminary AUM of $706.9 billion
for its subsidiaries, as of June 31, 2012, reflecting a rise of
3.4% from $683.5 billion as of May 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 demographics in the market. However, in the near term,
assets outflows will remain a significant headwind. Yet, with the
restructuring initiatives and cost-cutting measures, we expect
operating leverage to improve, and dividend payments to continue
inspiring investors' confidence in the stock.
Shares of Legg Mason currently retain 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.