Asset manager Legg Mason ( LM) posted a 38% rise in first-quarter earnings, but the results missed Wall Street's forecast as the recent wild ride in the equity markets shrank assets under management. For the quarter ended June 30, Legg Mason's net income rose to $156 million, or $1.08 a share, from $112.8 million, or 93 cents a share, a year earlier. Revenue more than doubled to $1.04 billion from $437.7 million last year, driven by the acquisitions of Citigroup's ( C) asset management unit and Permal Group, which were completed at the end of last year. The Citigroup deal made Baltimore-based Legg one of the nation's largest money managers. Despite the growth, the results were below analysts' average forecasts for earnings of $1.13 a share and revenue of $1.08 billion, according to Thomson First Call. The miss sent Legg Mason's shares down $9.78, or 10%, to $84.55 in recent trading. The company also disappointed in the previous quarter, and shares were down about 20% for the year before Tuesday's slide. "This was a very difficult quarter for the markets, and particularly equity markets, and we were not immune to the effects of these market difficulties," Chairman and Chief Executive Raymond "Chip" Mason said in a statement. "Our ability to reduce our cost base contributed to higher net earnings for the quarter despite the challenging market conditions, which caused lower revenues and contributed to lower performance fees." Assets under management at the end of the quarter were at $854.7 billion, down about 1.5% from the $867.6 billion at March 31. Legg Mason said it had about $7 billion in net client cash outflows along with $6 billion in market value decreases. But the company said the outflow in liquidity assets was offset by strong performances in institutional and wealth management divisions, fixed-income market appreciation and net client inflows into long-term fixed-income assets.