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Legg Mason (LM) October AUM Declines, Outflows Recorded

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Baltimore-based Legg Mason Inc. reported a fall in its assets under management (AUM) as of Oct 31, 2016, as compared with the prior month. Preliminary month-end AUM came in at $716.3 billion, down 2.3% from Sep 2016.

October’s AUM displayed fixed income inflows of $1.1 billion, $1.6 billion equity outflows, alternative outflows of $0.5 billion and liquidity outflows of $5.6 billion. Negative foreign exchange impact of about $2.7 billion was an unfavorable factor.

Legg Mason’s equity AUM at the end of October decreased 4% below the prior-month figure to $161.7 billion. Moreover, fixed income AUM inched down around 1% from the previous month to $393.6 billion. Alternative assets, including AUM managed by Clarion Partners, EnTrustPermal, RARE Infrastructure and Permal Capital Management declined around 1.5% to $70.9 billion.

The fall in equity, fixed income and Alternative AUM resulted in long-term AUM of $626.2 billion. The figure marked a 1.7% decrease from the prior month. Moreover, liquid assets, which are convertible into cash, decreased around 5.8% to $90.1 billion.

Competitive Landscape

Among other investment managers, Invesco Ltd. (IVZ - Free Report) announced its preliminary month-end AUM for Oct 2016. The company’s AUM came in at $807.5 billion, a fall of 1.5% from $820.2 billion recorded in the prior month. Further, Franklin Resources Inc. (BEN - Free Report) announced preliminary AUM by its subsidiaries of $723 billion for Oct 2016. This is down roughly 1.4% from $733.3 billion as of Sep 30 and nearly 9.7% below $801.1 billion as of Oct 31, 2015.

Our Viewpoint

Though foreign exchange fluctuations and absence of consistent growth in equity markets remain headwinds, 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.

Currently, Legg Mason carries a Zacks Rank #3 (Hold). A better-ranked company in the finance industry is Virtus Investment Partners, Inc. (VRTS - Free Report) , which has witnessed a downward earnings estimate revision of 6.7% over the past 30 days. Its share price has surged 34.8% over the past six months. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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