Baltimore-based Legg Mason Inc. (LM) reported a rise in its assets under management (AUM) as of Mar 31, 2014, as compared with the prior month. Preliminary month-end AUM came in at $701.8 billion, up 1.0% from the prior month.
The surge over the prior month mainly resulted from liquidity inflows and favorable markets, which included about $1.0 billion of positive foreign exchange. However, negative long-term outflows resulted from fixed income and slight equity outflows.
Legg Mason’s equity AUM as of March-end marginally increased 0.3% over the prior month to $186.4 billion. Moreover, fixed income AUM increased 0.3% from the prior month to $365.2 billion.
The rise in fixed income as well as equity AUM resulted in long-term AUM of $551.6 billion. The figure marked a slight rise of 0.3% from the prior month. Liquid assets, which are convertible into cash, rose around 3.7% to $150.2 billion.
Among other investment managers, Invesco Ltd. (IVZ) announced a marginal dip of 0.5% over the prior month in its preliminary month-end AUM for Mar 2014, which came in at $787.3 billion. However, Franklin Resources Inc. (BEN) declared preliminary AUM of $886.9 billion by its subsidiaries for Mar 2014, which exhibited a 0.5% rise from $882.2 billion as of Feb 28, 2014.
Our Viewpoint
We believe that 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. Moreover, a significant rebound in equity markets in the coming quarters would be a catalyst.
However, in the near term, asset outflows might remain a significant headwind. Nevertheless, owing to the company’s restructuring initiatives and aggressive cost cuts, we expect operating efficiencies to improve and dividend payments to keep up investors’ confidence in the stock.
Currently, Legg Mason carries a Zacks Rank #3 (Hold). A better-ranked asset manager worth consideration is AllianceBernstein Holding L.P. (AB) with a Zacks Rank #1 (Strong Buy).
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