Legg Mason reported Tuesday assets under management of $664.6 billion as of March 31, up 2.4% from the previous quarter and a 3.3% rise from a year earlier.
Market appreciation of $12.1 billion and an addition of $5.4 billion from the March acquisition of hedge-fund-of-funds unit Fauchier Partners were partially offset by $1.8 billion in outflows.
Clients pulled a net $3 billion from stock and bond funds in the quarter, the lowest level since 2007, President and CEO Joseph A. Sullivan said Tuesday during a conference call with investors and analysts.
Investors deposited $1.2 billion into Legg Mason's money funds, while withdrawing $2.6 billion from its stock funds and $400 million from its bond funds in the quarter.
Stock assets, which generally earn higher fees than fixed-income funds, fell 1% to $161.8 billion in the year ended March 31. Bond assets, managed mostly by Western Asset Management Co., rose 2.5% to $365.1 billion, and money funds climbed 11% to $137.7 billion.
Despite the overall AUM increase, profit in the quarter fell 62% as the firm entered its sixth year of client defections and from costs to cut office space.
Net income declined to $29.2 million in the three months ended March 31 from $76.1 million a year earlier. Legg Mason's earnings included a loss of $52.8 million related to reducing office space.
“Long-term flow trends showed modest improvement during the quarter,” Daniel Fannon, an analyst at Jefferies & Co., wrote Tuesday in a note to clients.
Performance fees helped Legg Mason's revenue increase 3% to $668 million. Total operating expenses increased 8.4% compared with a year earlier to $625 million on the severance and real estate costs.
Mr. Sullivan said in Tuesday's conference call that the firm is accelerating efforts to make acquisitions and that Legg Mason has had “interesting conversations” about potential transactions.