Legg Mason February AUM Up; Fixed Income Inflows Recorded

Baltimore-based Legg Mason Inc. LM reported a slight rise in its assets under management (AUM) as of Feb 28, 2015, as compared with the prior month. Preliminary month-end AUM came in at $711 billion, up around 0.8% from the prior month.

February’s AUM reflected fixed income inflows of $1.0 billion, $0.2 billion equity outflows and liquidity outflows of $3.8 billion. Negative foreign exchange impact of about $0.7 billion was an unfavorable factor.

Legg Mason’s equity AUM as of February-end increased 5.1% over the prior month to $202.6 billion. However, fixed income AUM inched down slightly from the prior month to $374.4 billion.

The rise in equity, partly offset by a fall in fixed income AUM resulted in long-term AUM of $577 billion. The figure marked a 1.6% increase from the prior month. Liquid assets, which are convertible into cash, decreased 2.9% to $134 billion.

Among other investment managers, Invesco Ltd.’s IVZ preliminary month-end AUM witnessed a rise for the month of Feb 2015. The AUM came in at $809.4 billion, up 2.9% from the prior month. The increase was attributable to net long-term inflows and favorable market returns. Moreover, Franklin Resources Inc. BEN declared preliminary AUM of $894.1 billion by its subsidiaries for Feb 2015. The company’s results exhibited 2.6% rise from $871.6 billion as of Jan 31, 2015.

Our Viewpoint

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 be a catalyst.

However, foreign exchange fluctuations 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 Woori Bank Co., Ltd. WF with a Zacks Rank #1 (Strong Buy).

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