Franklin Resources AUM inches up 1% despite continued outflows

Franklin Resources reported $753.2 billion in assets under management as of Sept. 30, up 1% from three months earlier and up 3% from a year ago as the result of market gains, which were dampened by continued net outflows, shows the manager's earnings release Thursday.

The company said market gains of $16.3 billion in the latest quarter were partially offset by $5.9 billion in net outflows. In the previous quarter, Franklin recorded $7.3 billion, and in the quarter ended Sept. 30, 2016, $17.7 billion in net outflows.

In prepared commentary released in conjunction with the earnings release, Franklin CEO Gregory Johnson said the reduction in net outflows in the latest quarter "was most pronounced" in the firm's international institutional channel. Franklin had $3.2 billion in institutional international inflows in the quarter compared to $3.5 billion in redemptions. In the prior quarter, Franklin reported institutional international inflows of $2.4 billion but redemptions of $6.3 billion.

But Mr. Johnson said in the statement that the U.S. institutional business "continues to face headwinds" because the Templeton Global Equity Fund, traditionally a big driver of inflows, has seen reduced interest from investors. U.S. institutional strategies had $2 billion in flows in the quarter but $5.9 billion in outflows. That compared to $2.5 billion in inflows in the previous quarter and $5.6 billion in outflows.

Franklin reported operating revenue of $1.62 billion in the quarter, flat from both the previous quarter and the year-over-year quarter.

Net income of $425.2 million in the quarter was up 4% from the previous quarter but down 10% from the year-over-year quarter.