Franklin Resources ((BEN)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Franklin Resources’ recent earnings call painted a picture of mixed performance, with the company showcasing notable improvements in net flows and robust growth in alternatives and ETFs. However, challenges persist, particularly with Western Asset Management outflows and equity and fixed income outflows. Despite these hurdles, strategic acquisitions and an increased institutional pipeline are providing positive momentum for future growth.
Quarterly AUM Growth
Franklin Resources reported an increase in assets under management (AUM), which ended the quarter at $1.61 trillion. This growth was attributed to positive market conditions and strengthening flows, marking a significant improvement from the previous quarter.
Improvement in Net Flows
The company experienced a marked improvement in long-term net outflows, which totaled $9.3 billion, compared to the prior quarter’s $26.2 billion. Excluding Western Asset Management, Franklin Resources achieved long-term net inflows of $7.8 billion, indicating a positive trend in net flows.
Strong Alternatives and ETF Growth
Franklin Resources’ alternatives fundraising generated $6.2 billion for the quarter, while its ETF platform achieved its 15th consecutive quarter of positive net flows, attracting $4.3 billion. The ETF platform reached a new high of $44.1 billion in AUM, representing a 19% growth from the prior quarter.
Increased Institutional Pipeline
The institutional pipeline of won but unfunded mandates rose by a net $4 billion, reaching a record $24.4 billion. This increase reflects the company’s growing institutional business and potential for future revenue.
Successful Acquisition to Expand Capabilities
Franklin Resources announced an agreement to acquire a majority interest in Apera Asset Management, a move that expands its direct lending capabilities across Europe’s lower middle market. This acquisition is expected to enhance the company’s private credit offerings.
Western Asset Management Challenges
Despite overall improvements, Western Asset Management continued to face long-term net outflows, which impacted Franklin Resources’ overall net flows. This remains a challenge for the company moving forward.
Equity and Fixed Income Net Outflows
Equity net outflows were recorded at $645 million, influenced by market volatility impacting growth strategies. Fixed income net outflows improved to $13 billion, although excluding Western, fixed income net inflows were $3.5 billion, indicating some positive movement.
Muted Real Estate Capital Markets Activity
The real estate capital markets activity remained muted, with greater volume in perceived stronger property types. This reflects ongoing challenges in the real estate sector.
Forward-Looking Guidance
Looking ahead, Franklin Resources emphasized its diversified and global approach to investment management, with 30% of its AUM managed outside the U.S. The company highlighted its strategic focus on innovation and technology, including blockchain initiatives, and reported that its investment in private credit, bolstered by the acquisition of Apera Asset Management, expanded its private credit AUM to nearly $90 billion.
In summary, Franklin Resources’ earnings call revealed a mixed performance, with significant growth in alternatives and ETFs counterbalanced by challenges in Western Asset Management and equity and fixed income outflows. The company’s strategic acquisitions and increased institutional pipeline provide a positive outlook for future growth, supported by a diversified and innovative approach to investment management.