On Thursday, Baltimore-based money manager Legg Mason Inc. (LM) reported preliminary month-end assets under management (AUM) of $657.9 billion for the month of May. AUM was down 4.0% from $685.3 billion at the end of the prior month though it slightly improved sequentially in April.
Till date in 2010, Legg Mason recorded a fall in AUM for the first time.
At the end of May, Legg Mason’s equity AUM totaled $163 billion, down 8.3% from $177.8 billion at the end of the prior month. The sequential decrease in stock reflects investors’ concerns of desertion of global economic recovery due to the rising debt in Europe.
Fixed income AUM dropped 2.3% sequentially to $358.8 billion from $367.1 billion at the end of April, 2010.
Total long-term AUM was $521.8 billion at the end of May, down 4.2% sequentially from $544.9 billion at the end of April, 2010. At the end of May, 2010, Liquidity assets, which are convertible into cash, contracted 3.1% sequentially to $136.1 billion from $140.4 billion at the end of April, 2010.
Legg Mason’s financial position and operating results are significantly affected by the overall trends and conditions of the financial markets, particularly in the United States. The profitability depends on wide factors, including the amount and composition of AUM, and the volatility and general level of securities prices and interest rates.
At the end of fiscal fourth quarter (ended March 31, 2010), Legg Mason reported $684.5 billion in AUM, up 8.2% on year-over-year basis from $632.4 billion in March, 2009. The increase in AUM was attributable to market appreciation.
At the end of March 2010, the company’s closest competitor BlackRock, Inc. (BLK) reported AUM of $3.36 trillion, up 163% from $1.28 trillion at the end of March 2009. The results substantially surpassed Legg Mason’s AUM for the same period.
Earlier in May, Legg Mason reported its operating results and announced a board authorization to repurchase up to $1 billion of common stock and strategic initiatives to drive increased profitability and growth.
Legg Mason reported fourth -quarter earnings of $0.39 per share. Earnings was substantially ahead of a loss of $2.33 per share reported in the fourth quarter of 2009 due to extensive expense control that led to higher-than-expected operating income. This was coupled with augmented growth in AUM.
After posting five consecutive quarterly losses, the company is experiencing improved business sentiments with early signs of economic recovery in 2010. Moreover, a sound cash position against a risk-free balance sheet provides ample leverage even as Legg Mason seeks to return shareholder value and increase investors’ confidence through its restructuring initiatives and share buyback program.
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