Baltimore-based Legg Mason Inc. (LM) experienced a modest rise in its assets under management (AUM) in February on a sequential basis. This was preceded by a stable AUM in Janaury and an increase in December.
LM reported preliminary month-end AUM of $672.7 billion, up 0.1% from $671.8 billion at the end of January. While fixed income and equity AUM grew during the month, it was largely offset by a drop in liquidity. Further, AUM decreased $2.2 billion owing to the divestiture of an Asian equity manager.
LM’s equity AUM in February inched up 1.7% from the prior month to $188.7 billion and fixed income AUM increased 0.1% from the prior month to $353.4 billion. The increase in equity and fixed income AUM primarily resulted in a 0.7% rise in LM’s long-term AUM to $542.1 billion from $538.5 billion at the end of the prior month. However, liquid assets, which are convertible into cash, decreased 2.0% to $130.6 billion from $133.3 billion at the end of Janaury 2011.
On a quarterly basis, LM’s AUM was $671.8 billion as of December 31, 2010, down 0.3% sequentially from $673.5 billion due to net outflows of $16.7 billion, significantly offset by market appreciation of $14.8 billion. On a year-over-year basis, AUM inched down 1.0% from $681.6 billion. Fixed income represented 53% of consolidated AUM as of December 31, 2010, liquidity represented 20% and equity comprised 27%.
Peer Performance
The closest competitor of LM – Invesco Ltd. (IVZ) reported AUM of $641.1 billion at the end of February 2011, up 2.9% from $623.1 billion at the end of January 2011. The increase in AUM was primarily driven by positive returns from financial markets, strengthening of foreign currencies against the U.S. dollar and net inflows into institutional money market funds.
Though near-term challenges remain with slow economic recovery, we believe LM has the potential to outperform its peers in the long run, given its diversified product mix and leverage to the changing demographics in the market. Additionally, with the restructuring initiatives and the cost-cutting measures, we expect operating leverage to improve while share buybacks to boost investors’ confidence on the stock.
LM currently retains its Zacks #3 Rank, which translates to a short-term ‘Hold’ rating. Considering the fundamentals, we have a long-term “Neutral” recommendation on the shares.
INVESCO LTD (IVZ): Free Stock Analysis Report
LEGG MASON INC (LM): Free Stock Analysis Report
Zacks Investment Research
