Bloomberg- Legg Mason Inc., home of money manager Bill Miller, said fiscal first-quarter profit rose 22 percent as fees from hedge-fund unit Permal Group more than tripled.
Net income in the quarter ended June 30 increased to $191 million, or $1.32 a share, from $156 million, or $1.08, a year earlier, the Baltimore-based company said today in statement. Eleven analysts surveyed by Bloomberg expected per-share earnings of $1.24.
Permal, whose assets have doubled to $35 billion since Legg Mason acquired the firm in November 2005, generated half of the company’s profit increase in the quarter. The company’s equity funds had a fifth straight quarter of redemptions amid subpar returns, while bond products brought in $8 billion.
“Legg Mason is benefiting from hedge funds, but performance fees tend to move around a lot from quarter to quarter,” Jeffrey Ptak, an analyst at Morningstar Inc. in Chicago, said today in an interview. “The long-term issue is lackluster performance in its stock funds.”
Legg Mason’s shares fell $3.23, or 3.3 percent, to $95.35 at 4:05 p.m. in New York Stock Exchange composite trading. They have advanced 0.3 percent this year, compared with the 8.8 percent gain in the 14-member Standard & Poor’s 500 Asset Management and Custody Banks Index.
Revenue rose 16 percent to $1.21 billion, while operating expenses increased 17 percent, mostly because of higher compensation. Fund fees climbed 19 percent to $577 million. Fees at Permal, which farms out clients’ money to other hedge-fund managers, rose to $54 million, compared with an average of $32 million a quarter since the acquisition.
Legg Mason’s assets increased 16 percent to $992 billion, mostly from rising stock prices. Equity funds had net outflows of $7 billion. Overall, net deposits were $2 billion, compared with $51 billion at rival BlackRock Inc.
Legg Mason’s equity assets rose 13 percent to $352 billion, and account for 35 percent of assets. Legg Mason also has $479 billion, or 48 percent of assets, in fixed income. The company’s bond funds are managed by its Western Asset Management unit, the second-biggest U.S. fixed-income manager. Pacific Investment Management Co. in Newport Beach, California, is the biggest bond manager.
