Asset manager Legg Mason Inc swung to a profit in the April-June quarter and posted its first quarterly net inflows for long-term funds since 2007, sending its shares up as much as 5 percent in Thursday morning trading.
Legg Mason is trying to regain its stature among top U.S. fund companies after performance problems led to years of withdrawals of investor cash.
The recent inflows - on investments in bond products - came during a period when many retail investors fled from fixed-income products and show Legg Mason's strength with institutional investors.
In a note to investors, Wells Fargo analyst Christopher Harris called the flow trends "a notable plus." Flows are watched closely as a measure of whether an asset manager is bringing in cash from customers.
Legg Mason said total assets under management fell to $644.5 billion at June 30 from $664.6 billion at March 31. The decrease was driven by an $11.6 billion decline in market performance and foreign exchange, as well as the net withdrawal of $8.7 billion from its money market funds.
Net flows into long-term funds were $200 million, as the $900 million that investors added to bond funds more than offset the $700 million withdrawn from equity funds.
The quarterly inflows for long-term funds were the first the company has posted since September 2007, Legg Mason Chief Executive Joseph Sullivan said in a telephone interview.
"Our improvements are starting to take hold and the trajectory is moving in the right direction. But nobody is declaring victory," Sullivan said.
Appointed Legg Mason's permanent chief executive in February, Sullivan has aimed to add new products, such as overseas equities, to Legg Mason's lineup. Speaking on a conference call with analysts, Sullivan said these efforts are still under way and the company continues to review relations with its investment units.
One change, Sullivan said, was that Legg Mason recently sold a wealth-management unit to its managers. The unit, Private Capital Management of Naples, Florida, has about $1.2 billion under management. Legg Mason will take a roughly $3 million charge in the current quarter in connection with the sale, he said.
For the three months ended June 30, Legg Mason's fiscal first quarter, it posted net income of $47.8 million, or 38 cents per share, compared with a loss of $9.5 million, or 7 cents a share, a year earlier, when it recorded charges.
Analysts surveyed by Thomson Reuters I/B/E/S had expected 36 cents per share.
Legg Mason shares rose as high as $35.85 in early trading and were up $1.50 at $35.53 at mid-morning.
(Reporting by Ross Kerber; Editing by Jeffrey Benkoe, Alden Bentley and John Wallace)