It may be a less than merry Christmas for Mark Fetting and the rest of the folks at Legg Mason [profile]. Falling profits at the mutual fund firm have caused Moody's Investors Service to put Legg Mason's "Baa1" credit rating under review, reports Joan Soloman of Dow Jones.

Analysts at the New York City-based credit ratings firm cited both persistent outflows that are shrinking Legg's AUM and compressing margins as well as leverage levels as being among the reasons for the evolving outlook.

The asset management firm, whose debt currently has a Baa1 rating, faces "competitive position pressures with leverage that is higher than that of most of its asset management peer groups," according to Moody's.

Based on Legg Mason's latest quarterly results, the ongoing investor outflows have resulted in a 25 percent drop in profit.

The mutual fund firm's assets under management also suffered thanks to market depreciation. The continuous outflows may reflect a drop in Legg Mason's institutional clients' confidence in the firm.

Analyst Dagmar Silva said Tuesday that "Legg Mason's AUM has declined by roughly nine percent over the last two years, which has hindered the firm's revenue growth and profitability."

Moody's noted that Legg's outlook will only return to stable once its investment platforms experience positive flows and its debt-to-earnings level improves together with its solid excess liquidity.  

Edited by: HFD


Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE