United Asset Management is feeling the sting of shrinking assets under management.

The Boston-based company reported Thursday that its total assets in institutional accounts, mutual funds, and private accounts fell to $195.8 billion as of March 31, from $201.4 billion at the beginning of the year.

Largely as a result, first-quarter profits dropped to $15.1 million, compared with $22.1 million a year earlier. Revenues fell to $217.7 million, from $241.8 million.

During the quarter, investors pulled out $6.5 billion more than they put in, offsetting $900 million added to the assets through investment performance.

Executives said they are pursuing a turnaround plan that was announced in February. United Asset Management, which buys asset management companies and lets them operate independently, is to invest $20 million this year to boost those subsidiaries' product development, client service, marketing, and other operations.

"While we're not satisfied with our results for the quarter, we're committed to fundamental change at UAM and are convinced that we're on the right track," Norton H. Reamer, the chairman and chief executive, said in a prepared statement. "We are financially strong and have the resources to achieve our goals."

Industry observers attribute the asset runoff to the company's ownership structure. In many acquisitions, United Asset Management has bought 100% of the company's equity, leaving the previous owners with lots of cash but no equity stake - and thus less incentive to do the marketing it takes to attract investment.

"Critics of UAM's aggregation strategy say its model makes millionaires of once-hungry entrepreneurs," said Alexander Paris Jr., director of research at Barrington Research of Chicago.

The top executives usually stay aboard after the buyouts, but "they're just not out there marketing as much," Mr. Paris said. "The least attractive part of the job is going out and asking for the order."

A United Asset Management spokesman said the wholly owned subsidiary model is not the problem.

"There is no correlation between the ownership of the firms within UAM and the growth of assets under management," Jonathan V. Hubbard said.

The outflows can be attributed in part to trends in the defined-benefit business, which accounts for 44% of the assets managed by the company, he said.

Defined-benefit plans are experiencing net outflows because strong equity markets are increasing the value of their assets-meaning that companies providing the retirement plans to their employees don't have to contribute as much to meet their obligations.

At the same time, United Asset Management's subsidiaries must continue paying out the benefits. Net outflows have also occurred, Mr. Hubbard said, because many of the subsidiaries use the value management style, which has been unpopular of late, and because of increased competition.

But Mr. Paris said strong investment performance has really masked a failure to drum up new business-and the problem is starting to show.

Fourth-quarter results bear that out. The company's assets under management increased $18.2 billion in the quarter, but $22.3 billion of that was added through investment performance and $500 million through an acquisition. At the same time, United Asset Management's subsidiaries had $4.6 billion in negative net cash flow.

"They've hit a plateau and have declined from there," Mr. Paris said.

After buying more than 50 firms in 15 years, United Asset Management is being more selective about the firms it buys and has not made an acquisition since the fall.

That has left more money free to try to bolster its subsidiaries and to carry out an aggressive stock buyback program to boost the value of the shares. United Asset Management went public in 1997.

Mr. Paris said the steps the company is taking to turn things around seem to be more than just tinkering.

"I think it's a real plan and that they've committed real dollars and real personnel to this transition," he said.

United Asset Management is mainly an institutional fund company. Sixty- seven percent of its assets are in institutional accounts, 24% are in mutual funds, and 9% are in separate accounts.

Its retail funds are generally distributed directly to investors or through brokerage firms and financial advisers.

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