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Money Management

Legg Mason assets slip 1.3% in quarter, edge up for year

Legg Mason (LM) reported $744.6 billion in assets under management as of June 30 on Wednesday, down 1.3% from the end of the previous quarter and up 0.5% from a year earlier.

In the earnings statement for the three months — the first quarter of Legg Mason's 2019 fiscal year — the company reported total net outflows of $3.8 billion, compared to net outflows of $9.5 billion in the previous quarter and net outflows of $11 billion in the quarter ended June 30, 2017.

By asset class, equity strategies had net outflows of $2.2 billion in the quarter vs. net outflows of $2.1 billion in the three months ended March 31 and net inflows of $1 billion a year earlier.

Fixed-income strategies had net inflows of $1.3 billion in the quarter ended June 30, net inflows of $2.8 billion in the prior quarter and net inflows of $300 million in the prior year's 2017.

Peter H. Nachtwey, chief financial officer, told analysts on an earnings conference call that fixed-income net inflows in 2018's second quarter represented nine straight quarters of net inflows for that asset class.

Net flows to alternative investment strategies were flat in the three months ended June 30, compared with inflows in the first quarter 2018 of $500 million and net outflows in the quarter ended June 30, 2017 of $800 million.

Liquidity vehicles experienced net outflows of $2.9 billion in the quarter ended June 30 compared to net outflows of $10.7 billion in the first quarter of 2018 and net outflows of $11.5 billion a year earlier.

Assets under management in equities were $206.4 billion in the second quarter 2018, up 1.7% compared to the prior quarter and up 5.2% from the second quarter a year earlier.

Fixed-income assets of $412.3 billion in the quarter ended June 30, down 2.4% from the first quarter but up 2.2% from a year earlier.

Alternative asset strategies totaled $66.4 billion as of June 30, up 0.5% from the previous quarter and down a slight 0.2% compared to the second quarter the previous year.

At $59.5 billion, Legg Mason (LM)'s liquidity assets were down 5.1% from the prior quarter and down 20.6% compared to the same quarter in 2017.

Legg Mason's second-quarter 2018 revenue was $747.9 million, down 5.8% from the second quarter 2017.

Net income was $66.1 million in the three months ended June 30, up 29.9% from a year earlier. Legg Mason restated its previous quarter's net income due to a $67 million settlement with the Securities and Exchange Commission.

Joseph A. Sullivan, Legg Mason chairman and CEO, told analysts on the conference call that the 1% decline in Legg Mason's assets under management in the second quarter was nearly all the result of liquidity outflows and foreign exchange impacts.

Mr. Sullivan said the firm's pipeline of unfunded mandates totaled $14.8 billion at the end of the second quarter and aggregate uncalled commitments to alternative investments totaled $2.6 billion, noting "there is a very robust undertone to our business right now."