Legg Mason, Invesco and Pzena Investment Management suffered declines in assets under management in the third quarter. Revenues and net income also slipped.
Legg Mason today reported assets under management of $841.9 billion in the third quarter, down 9% from the previous quarter and off 17% from the year before.
Market declines accounting for just over three quarters of the $80.9 billion drop in AUM from the prior quarter, according to a Legg Mason news release. Net client outflows, meanwhile, came to $20 billion, compared to outflows of $18.4 billion for the prior quarter.
Institutional clients accounted for $12.9 billion of those outflows, while managed investments, including retail investors, took out $5.1 billion, and high-net-worth clients removed $2 billion.
By asset class, equity AUM stood at $214.8 billion as of Sept. 30, down 15% from the prior quarter, while fixed-income assets came to $451.8 billion, down 8.4%. Liquidity AUM, meanwhile, edged down 0.4% to $175.3 billion.
For the quarter, Legg Mason posted a net loss of $103.8 million, widening from a $31.3 million loss in the second quarter, and off from the year-earlier quarters $177.5 million net profit. In its conference call, Legg executives tied its third-quarter loss to an after-tax charge of $191.1 million for support the firm provided to its money market funds, which have been dragged down by their exposure to special investment vehicles.
Operating income came to $220.2 million, down 3.8% from the second quarter and down 21% from the year before.
Total operating revenues, meanwhile, came to $966.1 million, down 8.3% from the prior quarter and down 18% from the year before.
In a conference call, Mark R. Fetting, Leggs president and CEO, invoked value investing icon Benjamin Grahams views on how investor judgement become clouded in the depths of a bear market to put in perspective the sell-off of his own firms stock, which has left its price-to-book value at a mere 0.3. He said Legg Mason has ample capital on hand to cover even a worst-case scenario for its roughly $4 billion in remaining SIV exposure. He added that clients around the globe continue to seek long-only and alternative strategies offered by Legg Mason affiliates.
Mr. Fetting said management teams at Legg and its affiliates are working hard to squeeze out cost savings wherever possible. Spokeswoman Mary Athridge said selective reductions in head count are likely, but no across-the-board cuts are expected.
At Invesco, third-quarter assets under management declined $409.6 billion, down 11% from the second quarter and off 19% from the year before.
The company attributed declining market values for $29.6 billion of the $51.7 billion drop in AUM from the prior quarter, according to a news release. Net outflows from long-term strategies came to $3 billion, compared to net outflows of $6.2 billion in the second quarter. Invescos money market funds saw net outflows of $8.1 billion, following a net inflow of $4.7 billion in the previous quarter. Currency fluctuations sheared $11 billion from AUM, compared to a $1.5 billion decline in the second quarter.
For the latest quarter, net income came to $131.8 million, down 19% from the second quarter and off 21% from the year before. Operating income, before taxes and extraordinary gains and losses, stood at $195.2 million for the quarter, down 19% from the prior quarter and down 24% from the year before.
Operating revenues for the three months through Sept. 30 amounted to $827.2 million, down 12% from the prior quarter and down 15% from the year before.
Invesco President and CEO Martin L. Flanagan, on a conference call this morning, said his companys results were solid in a very, very challenging market. While Invesco has a sense of urgency about managing costs, Mr. Flanagan suggested his management team is looking to use this time to improve our competitive position.
Pzena Investment Management reported third-quarter assets under management of $15.5 billion, down 16% from the second quarter and off 46% from the year before.
The value equity shops earnings statement released today showed institutional AUM of $9.4 billion at the end of the latest quarter, down 18% from the prior quarter. Pzena also manages $6.1 billion in subadvised accounts, off 14%.
Pzena reported net outflows of $1.7 billion for the three months ended Sept. 30, following net inflows of $700 million for the prior quarter and $400 million for the year-earlier quarter.
The money manager reported a net loss of $8.7 million for the latest quarter, compared with net income of $800,000 for the prior quarter and $26.3 million for the year-earlier quarter. Revenues, meanwhile, came to $25.1 million, down 11% from the prior quarter and down 38% from the year before.
In its news release, Pzena reported that it had paid down $25 million of a credit agreement with Bank of America; $22 million remain outstanding. Certain bank covenants were eliminated and the bank took a security interest in the firms accounts receivable. To help pay down the loan, Pzena borrowed $16 million in cash through senior subordinated 10-year notes issued to entities established by CEO Richard Pzena and others. The company has suspended all dividend payments until those debts are repaid.