The company attributed the growth to the reclassification of $16 billion in separately managed account assets that had been categorized as assets under advisement, as well as $8.4 billion in positive market performance and $700 million in positive foreign exchange, partially offset by outflows from cash/liquidity products.
Net outflows totaled $11 billion for the quarter vs. net inflows of $800 million for the first quarter and net inflows of $6.9 billion for the quarter ended June 30, 2016.
Net inflows of $500 million included equity inflows of $1 billion and fixed-income inflows of $300 million, which were partially offset by alternatives outflows of $800 million.
Cash/liquidity products saw $11.5 billion in net outflows for the quarter.
"Our flows continue to benefit from our next-generation investment capabilities with a number of our investment affiliates, combined with our ongoing strength in traditional investment strategies," said Joseph A. Sullivan, Legg Mason chairman and CEO, in the earnings statement.
"More generally, our progress in the quarter ties back to our focus on diversity by asset class, product and geography, which has materially expanded client choice," he added. "Two recent examples include the May launch of Legg Mason's first fully transparent active (exchange-traded funds) subadvised by ClearBridge Investments and the July launch of Royce's first-ever smart beta small-cap equity ETF."
As of June 30, fixed income represented 55% of AUM, while equity represented 26%; liquidity, 10%; and alternatives, 9%.
Revenue for the quarter was $793.8 million, up 10% from the prior quarter and up 13% from the same quarter a year earlier. Meanwhile, the company reported net income of $50.9 million for the most recent quarter, vs. net income of $75.9 million in the previous quarter and $33.5 million in the quarter ended June 30, 2016.