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Legg Mason (LM) Records Outflow in December Yet AUM Rises

Zacks Equity Research

Legg Mason Inc. LM, headquartered at Baltimore, reported an 8% rise in assets under management (AUM), as of Dec 31, 2017, compared with the prior-year figure. Preliminary month-end AUM was $767.2 billion, up 8% from December 2016.

December’s AUM displayed $1.7-billion fixed income inflows and $0.2-billion of alternative inflows, which were more than offset by equity outflows of $1.9 billion and $2.7 billion of liquidity outflows. Positive foreign exchange impact of $0.8 billion also remained a favorable factor.

Legg Mason’s equity AUM at the end of December 2017 rose around 22.8% from the prior-year figure to $207.6 billion. Fixed income AUM moved up 10.2% from the previous year to $420.1 billion. However, alternative assets declined 7.3% to $66.3 billion.

Rise in fixed income and equity AUM, partially offset by lower Alternative AUM, resulted in long-term AUM of $694 billion. The figure marked 11.6% growth from the previous year. However, liquid assets, which are convertible into cash, moved down 17.6% to $73.2 billion.

Competitive Landscape

Among other investment managers, Franklin Resources Inc. BEN announced preliminary AUM by its subsidiaries of $753.8 billion for December 2017. Results display a marginal rise from $753.2 billion recorded as of Nov 30, 2017. However, the figure moved up 4.7% from the prior year.

Invesco Ltd. IVZ reported preliminary month-end AUM of $937.6 billion for December 2017. The figure remains unchanged from the prior-month number. The AUM benefited from net long-term inflows. Also, FX increased December AUM by $1.1 billion. However, these were offset by a decline in money market AUM, PowerShares QQQs outflows and unfavorable market returns.

T. Rowe Price Group, Inc. TROW announced preliminary AUM of $991 billion for December 2017. The numbers remained unchanged from the prior-month figure. Client transfers from mutual funds to other portfolios of $1.7 billion were recorded in December 2017.

Our Viewpoint

Legg Mason has the potential to outperform its peers over the long run, backed by a diversified product mix and leverage to the changing market demography. However, the absence of continued growth in equity markets and foreign exchange fluctuations remain headwinds.

Legg Mason currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of the company rallied around 40.4% in 2017, outperforming 31.2% growth recorded by the industry.


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