Money manager Waddell & Reed reported a decline in first-quarter profits, owing to a rise in compensation, underwriting and distribution costs.Net income for the first quarter dropped to $22.8 million, or 28 cents a share, compared with $27.9 million, or 34 cents a share, a year earlier.

Waddell invests mainly in equities, which did poorly in the first quarter of the year. Net mutual fund sales totaled $157 million in the quarter and gross mutual fund sales were $1.2 billion.

Assets under management rose to $38.2 billion from $36.7 billion a year earlier, giving a boost to fees.

Still, the company's compensation increased in the quarter, "due to headcount growth and annual salary increases."

"While we are obviously not satisfied with our overall results for the quarter, we are encouraged with our progress in capturing organic growth in our mutual funds," Keith Tucker, the firm's chairman and chief executive officer, said in a statement.

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