Baltimore-based Legg Mason Inc (NYSE:LM) reported a rise in its assets under management (AUM) as of Nov 30, 2013, as compared with the prior month. Preliminary month-end AUM came in at $674.7 billion, up 0.7% from the end of October.
The surge over the prior month mainly resulted from an improved equity market and marginally increased fixed income inflows. Nevertheless, equity appreciation was largely offset by negative foreign exchange of about $2.5 billion.
Legg Mason’s equity AUM as of November-end increased 2.8% from the previous month to $180.3 billion. However, fixed income AUM dropped 0.9% from the prior month to $356.2 billion.
The fall in fixed income was offset by rise in equity AUM, thereby resulting in long-term AUM of $536.5 billion. The figure marked a marginal increase from the prior month. Liquid assets, which are convertible into cash, rose 2.2% to $138.2 billion.
Among other investment managers, Invesco Ltd. (IVZ) announced a slight rise in its preliminary month-end AUM for Nov 2013, which came in at $767.3 billion. Also, Franklin Resources Inc. (BEN) declared preliminary AUM of $870.6 billion by its subsidiaries for Nov 2013, which reflected a minimal increase from the prior month.
We believe that 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, in the near term, asset outflows will 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-placed asset manager worth consideration isWaddell & Reed Financial, Inc. (WDR) with a Zacks Rank #1 (Strong Buy).