Legg loss worse than forecast but funds stabilize

By Muralikumar Anantharaman

BOSTON (Reuters) - Legg Mason Inc (LM.N: Quote, Profile, Research, Stock Buzz) posted a wider-than-expected quarterly loss as investors yanked $18.4 billion from its underperforming funds and the U.S. asset manager took a charge to bail out its money market funds that are stuck with risky securities.

But the No. 2 publicly traded U.S. asset manager's shares rose 3 percent, outperforming the sector, after it said its money market funds had stabilized, performance at some of its key funds had improved and it had launched a series of plans for growth.

A drop in equity outflows to $11.6 billion from $17.2 billion in the fourth quarter ended March 31 also sparked confidence.

"Maybe investors were reassured that there appears to be on the equity side stability in terms of the assets they are losing," said Jean-Marie Eveillard, a portfolio manager at First Eagle Funds, which owns Legg shares.

Rival T. Rowe Price Group Inc (TROW.O: Quote, Profile, Research, Stock Buzz), meanwhile, reported a profit that met expectations, and its shares were little changed.

Legg Mason's improving funds included the battered Value Trust, run by one-time star stock picker Bill Miller.

Legg Chief Executive Mark Fetting said the fund has, in the past two weeks since July 15, outpaced the Standard & Poor's 500 index by 600 basis points as financials have rebounded and energy stocks have declined.

"It's a two-week metric, but it's indicative of a rotation of market leadership," Fetting told Reuters in an interview.