Legg Mason Inc. (NYSE:LM) Q3 2015 Earnings Conference Call - Final Transcript

Jan 30, 2015 • 08:00 am ET

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Legg Mason Inc. (NYSE:LM) Q3 2015 Earnings Conference Call - Final Transcript

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Presentation
Executive
Joseph Sullivan

These are the five key themes that I hope you keep in mind, as I walk you through some of the highlights.

Slide two presents the highlights for the quarter. Net income was $77 million or $0.67 per diluted share. Assets under management rose to $709 billion. We achieved $8.8 billion of long term inflows, driven by nearly $10 billion in fixed income, offset by approximately $1 billion in equity outflows.

Fixed income inflows are particularly notable as the mutual fund industry actually experienced outflows in US taxable fixed income for the quarter. While there is both art and science to the analyses, we believe that approximately two-thirds of our fixed income inflow was impacted

Executive
Joseph Sullivan

by the money in motion underway in this space. That said and I want to be very clear about this, even absent the recent manager transition we have been achieving solid net inflows and gaining market share, in particular with our unconstrained and absolute return products, which offer the potential for our active managers to deliver value, especially in a more challenging market environment.

We recorded the second consecutive quarter of a record global distribution growth and net sales across the entire platform, and as I mentioned earlier our investment performance remained strong broadly with 75% or more of strategy AUM exceeding benchmarks for all relevant time periods. We ended the quarter with an aggregate $8.7 billion in unfunded wins, up from $6.3 billion at the end of September.

We closed the acquisition of Martin Currie and the sale of LMIC during the quarter and we repurchased 1.6 million shares. And finally our Board of Directors has approved an additional $1 billion share repurchase authorization, which we intend to deploy once we exhaust our current authorization.

Slide three is a very important slide. It shows AUM by affiliate in order of their earnings contribution to Legg Mason and assets under management by asset class, by client type and by geography. This slide reinforces the increasing diversification of our business, a fact that I believe continues to be underappreciated.

We see significant opportunity in our retail business, not only with our existing strategies and legacy affiliates but as we bring Martin Currie strategies into retail structures and implement sales campaigns around new products launched with QS investors. As I said earlier these are initiatives that will take time but they are part of a broader plan that will position Legg Mason for sustained and dependable growth going forward.

I am quite pleased with the progress we have made in integrating those firms into Legg Mason and we are solidly on track with bringing QS and Martin Currie to the global retail marketplace. Slide four provides a snapshot of each of our core affiliates. Brandywine Global had 2.3 billion in total inflows laid by $1.6 billion in fixed income and $700 million in equities. Brandywine's pipeline remains strong at $2.1 billion.

Executive
Joseph Sullivan

And for the second time in three years Steve Smith, David Hoffman and Jack McIntyre were