Baltimore-based Legg Mason Inc. (LM) reported an increase in its assets under management (“AUM”) as of Dec 31, 2014, as compared with the prior month. Preliminary month-end AUM came in at $709.1 billion, slightly up from $707.4 billion reported in Nov 2014.
The increase in AUM over the preceding month reflects fixed income inflows of $3 billion and long-term inflows of $1.7 billion. These were, however, partially offset by equity outflows of $1.3 billion. The liquidity inflows came in at $3.8 billion. The month-end AUM included a negative foreign exchange impact of $2.0 billion.
Legg Mason’s fixed income AUM was relatively flat at $367.4 billion compared to the prior-month figure of $367.0 billion. However, equity AUM, as of December, fell 1.2% over the prior month to $198.7 billion.
The month-end long term AUM stood at $566.1 billion, slightly down from $568.1 billion as of Nov 2014. This decline resulted from decrease in equity AUM which more than offsets the rise in fixed income AUM. Nevertheless, liquid assets, which are convertible into cash, rose 2.7% to $143.0 billion.
Among other investment managers, Invesco Ltd. (IVZ) reported a 1.4% decline in preliminary month-end AUM for Dec 2014 to $792.4 billion, Artisan Partners Asset Management Inc.’s (APAM) December AUM came in at $107.9 billion, down 1.5% from the preceding month, whereas Pzena Investment Management, Inc.‘s (PZN) preliminary AUM for Dec 2014 climbed 1.5% sequentially to $27.7 billion.
Our Viewpoint
Equity AUM outflows and foreign exchange fluctuations continue to pose major headwinds for Legg Mason. Also, the company remains troubled by a persistent low interest rate environment and regulatory reforms. These negatives, along with a volatile economy, keep us apprehensive about the company’s future growth.
However, we believe Legg Mason has the potential to drive overall inflows, which will increase the company’s AUM. Further, in our opinion, the company is poised to benefit in the long term backed by its accretive acquisitions. Moreover, a significant rebound in equity markets in the coming quarters would act as a catalyst.
Legg Mason currently carries a Zacks Rank #3 (Hold).
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