Derivatives and Hedging

9 Months Ended

Dec. 31, 2011

Derivatives And Hedging Disclosure [Abstract]

Derivatives and Hedging

10. Derivatives and Hedging

The disclosures below detail Legg Mason’s derivatives and hedging excluding the derivatives and hedging of CIVs. See Note 12, Variable Interest Entities and Consolidation of Investment Vehicles, for information related to the derivatives and hedging of CIVs.

Legg Mason uses currency forwards to economically hedge the risk of movements in exchange rates, primarily between the U.S. dollar, euro, Australian dollar, Canadian dollar, Brazilian real, Singapore dollar, Japanese yen, and Great Britain pound. In the Consolidated Balance Sheets, Legg Mason nets the fair value of certain foreign currency forwards executed with the same counterparty where Legg Mason has both the legal right and intent to settle the contracts on a net basis. Legg Mason has not designated any derivatives as hedging instruments during the periods ended December 31, 2011 and 2010.

Legg Mason uses market hedges on certain seed capital investments by entering into futures contracts to sell index funds that benchmark the hedged seed capital investments. Open futures contracts required cash collateral of $4,240 and $7,099 as of December 31, 2011 and March 31, 2011, respectively.  

The following table presents the fair values as of December 31, 2011, and March 31, 2011, of derivative instruments not designated as hedging instruments, classified as Other assets and Other liabilities in the Consolidated Balance Sheets:

	December 31, 2011				March 31, 2011
	Assets		Liabilities		Assets		Liabilities
Currency forward contracts	$	10,169	$	853	$	1,112	$	1,633
Futures contracts	35		549		57		1,487
Total	$	10,204	$	1,402	$	1,169	$	3,120

The following table presents gains (losses) recognized on derivative instruments for the three and nine months ended December 31, 2011 and 2010:

		Three months ended December 31,
		2011					2010
	Income Statement Classification	Gains		Losses			Gains		Losses
Currency forward contracts for:
Operating activities	Other expense	$	3,628	$	(946	)	$	1,184	$	(1,083	)
Seed capital investments	Other non-operating income (expense)	270		(149		)	85		—
Futures contracts	Other non-operating income (expense)	198		(2,290		)	164		(2,920		)
Total		$	4,096	$	(3,385	)	$	1,433	$	(4,003	)

		Nine months ended December 31,
		2011					2010
	Income Statement Classification	Gains		Losses			Gains		Losses
Currency forward contracts for:
Operating activities	Other expense	$	6,869	$	(2,839	)	$	4,356	$	(4,917	)
Seed capital investments	Other non-operating income (expense)	447		(93		)	71		(88		)
Futures contracts	Other non-operating income (expense)	5,669		(2,196		)	1,378		(4,899		)
Total		$	12,985	$	(5,128	)	$	5,805	$	(9,904	)