Fund companies are poised to report higher profits for the December quarter compared with a year ago as rising markets pushed up total assets.

But the flows of investor dollars into their mutual funds will vary widely among firms, analysts say, making for some closely-watched results as managers release earnings starting with BlackRock Inc on January 25.

The theme is that market appreciation should help the asset managers in general, said Gabelli & Co analyst Mac Sykes. Recent flow trends, he said, mean that stock managers may report higher profits and better momentum than companies better known for bond funds.

The equity guys will probably benefit more than the fixed-income side, he said.

As of Friday analyst estimates tracked by Thomson Reuters I/B/E/S supported the idea of higher profits. For instance, Legg Mason Inc of Baltimore should earn $62.2 million, or 39 cents per share, for the quarter ended December 31, up from net income of $44.9 million, or 28 cents a share, a year earlier, analysts estimate. The firm reports on January 26

Another company likely to report a big profit gain is Affiliated Managers Group, expected to report a profit in the December quarter of $99.8 million, or 98 cents a share, up from $59.9 million, or 55 cents a share, a year earlier. AMG reports on February 1

But analysts also wonder where flows are headed, which will determine the future direction of stocks. For the quarter, investors pulled $12.1 billion out of U.S. diversified equity funds and added $22.2 billion to taxable bond funds, Lipper estimated, in keeping with trends since the financial crisis.

Customer moods changed in the fall as equity markets gained steam, giving rise to hopes that some managers will benefit because traditional stock funds earn higher profits. We have seen head-fakes before, but I believe we're at an inflection point from fixed income investing to greater risk-taking, said Credit Agricole analyst Chris Spahr.

Outflows from domestic equity funds fell through December and turned to an inflow of $456 million in the last week. Bond funds posted an outflow of $15.2 billion in the four weeks ended December 29, according to The Investment Company Institute.

WATCHING FRANKLIN

A company whose performance should offer clues on flows is Franklin Resources Inc of San Mateo, California, which reports on January 27. Analysts expect a profit of $425 million, or $1.89 a share, up from $355.6 million, or $1.54 a share a year earlier. But Franklin faces questions about its bond exposure.

Susquehanna analyst Jonathan Casteleyn recently cut his rating on Franklin, citing industry bond outflows. We view the first fixed income drawdown in two years as a warning sign, he wrote.

Franklin reported inflows in the past quarter, as did AMG, which posts results on February 1, and T Rowe Price Group , which reports January 28.

At three companies that reported outflows in the quarter ended September 30, meanwhile, investors will be looking for a turnaround. One is Janus Capital , which reports on January 27. Its shares have risen in recent weeks on its heavy equity holdings. Another is AllianceBernstein Holding LP , which reports on February 10. Its shares have fallen lately on concerns about funds performance.

A third company with recent outflows, Legg Mason, has posted improved recent performance of late. Investors pushed up its stock in the quarter partly tied to a reorganization that cut around 350 jobs, or 10 percent of the workforce. At the end of the year Legg Mason announced one more departure, that of Senior Vice President David Odenath. In a filing Legg Mason said it will take $6.7 million in charges in the quarter ended Dec 31 to pay for severance agreements with Odenath.

(Reporting by Ross Kerber)

Citigroup