Baltimore-based Legg Mason Inc. (LM) reported a surge in its assets under management (AUM) as of Oct 31, 2013, compared with the prior month. Preliminary month-end AUM came in at $669.9 billion, up 2.1% from September-end.
The rise over the prior month mainly resulted from favorable markets. Moreover, Legg Mason recorded positive long-term flows, aided by equity inflows, which were mostly offset by fixed income outflows.
Legg Mason’s equity AUM as of October-end increased 3.5% from the prior month to $175.4 billion. Moreover, fixed income AUM inched up 1.2% compared with the prior month to $359.3 billion.
The increase in fixed income and equity AUM resulted in a long-term AUM of $534.7 billion, reflecting a 1.9% rise against the prior month. Liquid assets, which are convertible into cash, jumped 2.8% to $135.2 billion.
Among other investment managers, Invesco Ltd. (IVZ) announced a 2.5% rise in its preliminary month-end AUM for Oct 2013, which stood at $763.9 billion. Another firm – Franklin Resources Inc. (BEN) declared preliminary AUM of $844.7 billion by its subsidiaries for the month of Oct 2013, reflecting an increase of 2.9% over the prior month.
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. Moreover, a significant rebound in equity markets in the coming quarters would act as a catalyst.
However, in the near term, asset outflows will remain a significant headwind. Yet, owing to the restructuring initiatives and cost-cutting measures, we expect operating efficiencies to improve for Legg Mason and dividend payments to continue to inspire investors’ confidence in the stock.
Currently, Legg Mason carries a Zacks Rank #3 (Hold). However, a better performing company in the same industry with a Zacks Rank #1 (Strong Buy) is Waddell & Reed Financial, Inc. (WDR).
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