Legg Mason Inc.'s quarterly profit fell 4 percent as operating costs grew and investors continued to withdraw money from the Baltimore asset manager's funds.
Meanwhile, Legg Chief Executive Officer Mark R. Fetting said Monday that efforts to "streamline" its business by cutting 350 back-office jobs — 250 of them in Owings Mills and Baltimore — began July 1 and are on target to save $130 million to $150 million on an annual basis by March 2012.
The work force reduction to boost profit margins was announced in May, but employees won't start losing jobs until the end of the year, Fetting said.
"We're very gratified with the way it's gone," he said in a brief interview. "I think our colleagues have appreciated it. As I said when we initiated the streamlining that we would make sure and I would make sure that we're doing the right thing by the impact, and I think we've honored that."
Net income for the fiscal first quarter that ended June 30 was $47.9 million, or 30 cents per diluted share, compared with $50.1 million, or 35 cents per diluted share, in the year-ago period.
Profit was dampened by increased operating costs, which rose to $571.4 million, up from $554.8 million. Most of the increase was due to charges related to launching a new closed-end fund managed by a Legg subsidiary, ClearBridge Advisors, as well as costs associated with the job cuts.
Steep market declines and client withdrawals hurt Legg's assets under management, which dropped 6 percent to $645.4 billion. Assets were $684.5 billion as of March 31.
"We delivered a solid quarter in a volatile market with more work to do to position Legg Mason for future growth," Fetting told analysts during a conference call.
Legg has struggled with client redemptions during the past several years as its key mutual funds performed poorly. While performance has improved during the past year, withdrawals widened from the fourth quarter.
Investors took out $23.1 billion from its funds during the quarter. Legg's money market funds took the biggest hit, with $14.4 billion in outflow. Fetting attributed some of the exodus to investors shifting their money from low-yielding products to other assets.
Fixed-income outflows were $9.4 billion.
The bright spot was in its stock funds, where clients invested $700 million, the first quarterly equity inflows in more than four years. Most of the new investment was due to the new ClearBridge fund, which raised $1.3 billion, Legg's most successful closed-end launch ever, Fetting said.
Revenue for the quarter was $674.2 million, up from $613.1 million in the previous year.
Shares rose 99 cents, or 3.4 percent, to close Monday at $30.08. Earnings were announced after the market closed.