On Monday, Baltimore-based
Legg Mason Inc.
) reported a fall in its assets under management (AUM) as of
October 2012, compared with the prior month. However, the company
reported a rise in the last four months.
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Preliminary quarter-end AUM came in at $645.6 billion, down 0.8%
compared with the prior month. Equity AUM and liquidity AUM were
down in the quarter under review, though Fixed Income AUM
Legg Mason's equity AUM as of October-end inched down 4.5% from
the prior month to $146.5 billion while liquid assets, which are
convertible into cash, dipped 0.5% to $127.3 billion.
Fixed income AUM surged 0.6% compared with the prior month to
$371.8 billion. The fall in equity AUM, partly offset by the rise
in fixed income AUM resulted in long-term AUM of $518.3 billion,
reflecting a 0.9% decline against the prior month.
As of September 30, 2012, Legg Mason's AUM was $650.7 billion, up
3% sequentially from $631.8 billion, driven by market
appreciation of $20.7 billion and net client inflows of $0.2
billion, partially offset by dispositions of $2.0 billion.
Fixed income represented 57% of consolidated AUM as of September
30, 2012, liquidity represented 20% and equity comprised 23%.
During the quarter, liquidity inflows were about $9.7 billion.
However, equity and fixed income outflows were $5.7 billion and
$3.8 billion, respectively. Besides, average AUM was $639.4
billion compared with $635.5 billion in the prior quarter.
One of Legg Mason's peers,
) announced a 0.8% fall in its preliminary month-end AUM for
October 2012. The company's AUM for the reported month was $677.4
billion compared with $683.0 billion at the end of September.
Another peer -
Franklin Resources Inc.
) - declared preliminary AUM of $753.9 billion by its
subsidiaries for the month of October 2012. The company's results
witnessed an escalation of 0.5% from $749.9 billion as of
September 30, 2012. Moreover, it increased 8.6% from $694.1
billion as of October 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,
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 #2 Rank, which translates
into a short-term Buy rating.