LM: Legg Mason’s Outflows Accelerate on Western Asset Bond Unit
By Sree Vidya Bhaktavatsalam
Jan. 21 (Bloomberg) -- Legg Mason Inc. said client withdrawals at its stock and bond funds accelerated in the final months of 2009 even as investors poured a record amount into fixed income and equity markets rebounded.
Outflows at the Baltimore-based asset manager rose to $33 billion from $8 billion in the previous quarter, led by fixed- income withdrawals of $24 billion, the company said today in a statement. The outflows cut assets under management by 3 percent to $681.6 billion. Legg Mason’s shares slumped as much as 7.7 percent to $29 in pre-market trading.
The Western Asset Management bond unit had outflows in its core fixed-income products despite improved performance in 2009 because institutional investors reallocated their portfolios after the global credit crisis, Legg Mason’s chief executive officer, Mark Fetting, said in a Dec. 9 client presentation. Western Asset, whose funds lagged behind rivals in 2008, failed to benefit from $357 billion investors poured into bond funds in 2009, according to Morningstar Inc. in Chicago.
“It has been a good market for fixed-income so the fact that assets were down is a disappointment,” Jeffrey Hopson, an analyst with Stifel Nicolaus & Co. in St. Louis, said in an interview.
Legg Mason’s net income for the fiscal third quarter ended Dec. 31 was $44.9 million, or 28 cents a share, compared with a loss of $1.49 billion, or $10.59, in the same period in 2008, when results were hurt by a writedown at a unit that manages money for wealthy individuals and institutions. Earnings included an 11 cent loss from a real estate lease.
‘Costs and Efficiencies’
Analysts expected earnings of 33 cents a share, excluding some items, according to the average of 13 estimates in a Bloomberg survey.
Western Asset, based in Pasadena, California, managed about 54 percent of Legg Mason’s assets. Equity funds accounted for about 25 percent, while money-market funds made up the remainder.
“We are cognizant of the fact that it takes some time for flows to follow performance and we are working hard in conjunction with our distribution teams to position ourselves to capture assets,” Fetting said in the statement. “We will also increase our vigilance on cost and efficiencies.”
Outflows from equity funds rose to $4 billion from $2 billion in the prior quarter. Withdrawals in stock funds moderated from $17 billion in the year-earlier period, as performance at funds including those managed by managers such as Bill Miller rebounded in 2009. Miller’s $2.1 billion Opportunity Trust fund soared 93 percent in 2009, while his $4.8 billion Value Trust climbed 41 percent, beating the 26 percent gain in the Standard & Poor’s 500 Index.
Bill Miller
Miller, known for beating the S&P 500 Index a record 15 straight years through 2005, trailed the U.S. market benchmark for the next three years. Value Trust fell 55 percent in 2008, while the Opportunity Fund dropped 65 percent. Both recovered last year after Miller’s bet on an improving economy paid off.
Legg Mason reported its first quarterly profit since December 2007 in the three months through June 30 after ending losses stemming from its money funds.
The company announced earnings before the start of regular U.S. trading. Legg Mason has advanced 63 percent in New York Stock Exchange composite trading in the past 12 months, compared with the 35 percent increase in the S&P 500.
To contact the reporter on this story: Sree Vidya Bhaktavatsalam in Boston at sbhaktavatsa@bloomberg.net.
Last Updated: January 21, 2010 08:25 EST
_______________________________________________________
If you take anything I say as advice, you're crazier than I am.
