Franklin Resources Draws $18.4 Billion as Core Flows Turn
Long-term net inflows reached $18.4 billion as equity and fixed-income strategies returned to positive territory.
Franklin Resources (BEN), the global asset-management franchise, recorded $18.4 billion of long-term net inflows, up from $16.9 billion in the prior quarter and reversing $9.3 billion of outflows a year earlier. Equity strategies drew $2.0 billion after losing $4.7 billion QoQ, while fixed income attracted $2.6 billion after $0.3 billion of outflows.
The improvement in traditional strategies offset slower momentum elsewhere. Alternative and multi-asset inflows declined QoQ to $9.1 billion and $4.7 billion, respectively, from $12.4 billion and $9.5 billion. Cash-management products recorded $7.0 billion of outflows after drawing $11.4 billion in the prior quarter.
Market appreciation and positive long-term flows lifted ending assets under management 7% QoQ and 11% YoY to a record $1.792 trillion. Average AUM rose 3% QoQ and 12% YoY to $1.750 trillion, supporting a broader increase in fee revenue.
Alternative AUM reached a record $294.2 billion, up 4% QoQ and 14% YoY. Franklin raised $11.8 billion for alternative strategies during the quarter, including $10.3 billion in private markets, extending the firm’s push into higher-fee private assets.
Investment-management fees increased 3% QoQ and 14% YoY to $1.866 billion. Sales and distribution fees rose 2% QoQ and 15% YoY to $404.5 million, while shareholder-servicing fees advanced 8% QoQ and 24% YoY to $74.3 million.
Adjusted operating margin expanded 90 bps QoQ and 430 bps YoY to 28.0%, and adjusted operating income rose 7% QoQ and 35% YoY to $508.9 million. GAAP operating margin contracted 490 bps QoQ to 9.2% as expenses included a $100 million regulatory-settlement charge, $77.2 million of special termination benefits and a $33.0 million intangible-asset impairment.
Total operating expenses rose 9% QoQ and 12% YoY to $2.143 billion, driven by a 67% sequential increase in general, administrative and other expense. Franklin returned $521.5 million to shareholders, including $348.1 million used to repurchase 10.4 million shares, while holding its quarterly dividend at $0.33 a share. The turn in equity and fixed-income flows left the firm entering the next quarter with a broader base for fee growth.