Global asset management firm Legg Mason (NYSE:LM) reported fourth-quarter results yesterday, continuing a positive earnings parade from asset managers such as T. Rowe Price (NASDAQ:TROW) and Amvescap (NYSE:AVZ).

The fourth-largest U.S. money manager posted fourth-quarter earnings of $172.5 million, a 14.9% increase from a year ago, down slightly from its third-quarter profit. An increase in management fees from funds and separate accounts offset a decrease in performance-related fees. Revenue rose to a record $1.14 billion from $1.05 billion a year ago, and from $1.13 billion the prior quarter. Assets under management climbed 3% to a record $968.5 billion, augmented by both market appreciation and new investments. An additional net $12 billion flowed to money-market funds and $5 billion to fixed-income funds during the last quarter, while a net $3 billion was withdrawn from equity funds.

That last tidbit is an issue hobbling Legg. Equity products generate higher fees than fixed-income offerings. As CEO Raymond Mason acknowledged, "Equity flow and performance continues to be an issue with certain of our equity managers." Funds such as Legg Mason Value Trust (FUND:LMVRX) and Legg Mason Partners Aggressive Growth (FUND:SHRAX) have been weak performers, and strong performance comprises an essential part of marketing. Mason believes performance will be "self-correcting" as the market becomes more favorable to the U.S. growth bias of the funds.

To be fair, Legg's had a busy year. This quarter is all the more notable because it represents the one-year anniversary of the firm's acquisition of the asset management unit of Citigroup (NYSE:C) in exchange for its private-client and capital markets business. Quarter-over-quarter comparisons now become more meaningful. It hasn't been easy for the company to adapt to the near-doubling of its asset base and attendant challenges from the transaction. The company initiated a rebranding effort last November to tag certain acquired funds with the "Legg Mason Partners Fund" moniker, but needed to launch a major advertising campaign in late March to address concerns over broker confusion.

Management believes it has now transitioned from an integration focus to a growth focus for the "new" Legg Mason. The new Legg still needs to keep working on a variety of issues. Although management claims that a large former Citigroup account lost in the first quarter of 2007 will have little impact on business, this news may damage public perception. Another red-faced moment occurred when succession plans announced a year ago for James Hirschmann to succeed Mason as the firm's next CEO were unexpectedly scuttled last month; Hirschmann declined for personal reasons, leaving Mason in the top spot for the foreseeable future. On the positive side, management is excited about developing new vehicles and structures to counter pressure seen on traditional products and is actively seeking to expand its global reach.

Clearly, Legg's not bionic. But if its equity performance undergoes some rehab, and if the firm focuses on the future while flexing its large distribution network, Legg could give rivals a run for their revenue.

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Legg Mason is a Motley Fool Inside Value pick. Amvescap is an Income Investor selection.

Fool contributor S.J. Caplan does not own shares of the companies discussed in this article. The Fool has a disclosure policy.