* Inflows gain for three large firms as market indexes set
* Invesco CEO sees early stage of "Great Rotation" into
* Outflows at Legg Mason slowest since 2007
By Ross Kerber and Aaron Pressman
April 30 Major U.S. money managers on Tuesday
reported higher quarterly profits that largely beat Wall Street
expectations after rising stock markets renewed investor
interest in higher-fee equity funds.
Franklin Resources, Invesco and Affiliated
Managers Group reported strong customer net inflows with
an increasing emphasis on stock funds, which typically carry
higher fees and profit margins.
Shares of Invesco jumped 5.4 percent, shares of AMG gained 2
percent and shares of Franklin rose 0.3 percent.
With the Standard & Poor's 500 Index setting records, many
investors who sat on the sidelines for the past few years have
been jumping back into the stock market. That has buoyed the
fund industry, which historically has made more money when
stocks are in vogue.
At Invesco, customers added a net $2.4 billion to equity
funds, a reversal from the fourth quarter of 2012 when they
pulled $3.3 billion. Still, the firm's bond funds attracted $5
billion in the first quarter, up from $3.4 billion in the prior
That prompted Invesco chief executive Martin Flanagan to
tamp down expectations of a huge wave of further flows into
equities, which some analysts have described as a "great
rotation" from bonds to stocks.
"I would classify it (as the) early stages of the rotation
into equities," Flanagan said on a call with analysts. "I would
expect people to continue to be cautious throughout the summer."
The company reported net income per share excluding certain
items of 52 cents, better than the 47 cents expected by
analysts, according to Thomson Reuters I/B/E/S.
At Franklin, the company reported net new flows of $700
million to its global and international equity funds, reversing
an outflow of $4.4 billion from the category in the prior
quarter ended December 31.
Still, its well-known international taxable bond funds, led
by Michael Hasenstab's $70.9 billion Templeton Global Bond Fund,
remained the company's most popular products. Net new flows to
the category totaled $15.3 billion during the quarter, Franklin
Franklin, based in San Mateo, California, reported net
income of $2.69 per share for the three months ended March 31,
its fiscal second quarter, beating the average analysts'
estimate of $2.50 per share.
Affiliated Managers said its customers added a record net
inflow of $12 billion in the first quarter. The firm's adjusted
net income per share of $2.27 exceeded the average analyst
estimate of $2.03.
Amid the generally good results, Legg Mason Inc of
Baltimore reported that customers continued to depart from its
funds. The firm has yet to regain investor confidence after
stumbles during the financial crisis.
Legg Mason reported a net outflow of customer cash during
the quarter though at a slower rate than in the past and said
its equity-focused ClearBridge unit had its best quarter of
customer inflows since 2005.
"Investors are becoming more comfortable, particularly in
the equity markets, than they have been," said Legg Mason Chief
Executive Joseph Sullivan in an interview. "There's still a lot
of cash on the sidelines earning nothing, and that cash becomes
impatient at some point," he said.
Overall, the company reported a net outflow of $1.8 billion
and said excluding money funds, the $3 billion that left its
stock and bond funds was the lowest outflow since 2007.
"Now to be sure less negative is still negative," CEO
Sullivan said on a conference call with analysts. "However the
improvement in net flows is meaningful and encouraging."