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Money Management

Franklin Resources AUM down for quarter, year

Franklin Resources managed $649.9 billion as of Dec. 31, the end of the first quarter of the company's fiscal year, down 9.4% from Sept. 30 and a 13.8% drop from Dec. 31, 2017, according to Franklin's earnings report issued Wednesday.

Assets under management at Franklin have declined in five of the past seven quarters.

Net outflows in the latest quarter were $7.3 billion, compared with net outflows of $13.6 billion in the previous quarter and net outflows of $2.3 billion in the year-earlier quarter.

Greg Johnson, chairman and CEO, attributed most of the decline in AUM over 2018 to market volatility, according to an executive summary accompanying Franklin's earnings release.

Institutional net outflows from U.S. and non-U.S. asset owners were $4.1 billion in the latest quarter vs. net outflows of $7 billion in the previous quarter and net outflows of $300 million in the year-earlier quarter. In previous quarters, Pensions & Investments included only U.S. net flow data in reporting Franklin's institutional long-term changes.

"On the institutional front, we saw clear improvement this quarter (ended Dec. 31) with much lower redemptions and higher sales," Mr. Johnson said, noting that inflows from domestic and international institutional investors rose to $5 billion in the current quarter from $4.8 billion in the prior quarter.

Mr. Johnson also pointed to much lower redemptions from U.S. asset owners of $700 million in the current quarter compared to $2.7 billion in the quarter ended Sept. 30 as part of the reason for lower net outflows.

A $600 million mandate from an unnamed institutional investor into a strategy managed by Franklin's investment team in Mexico "bolstered international sales" to $2.5 billion in the fourth quarter from $2.3 billion in the previous three-month period, Mr. Johnson said. Redemptions also were down in the current quarter for $3.4 billion from $4.3 billion in the prior quarter.

In the latest quarter, equities had net inflows of $1.4 billion, while fixed income experienced net outflows of $6.4 billion, and multiasset and balanced strategies lost a combined $2.3 billion in net outflows. In the previous quarter, net outflows for equities were $8.2 billion; fixed income, $5 billion; and multiasset and balanced, a combined $400 million.

Taxable global and international fixed income sustained the largest net outflows in the latest quarter, at $2.7 billion.

Equity assets under management totaled $263.1 billion as of Dec. 31 down 15% from three months earlier and 18.1% below a year earlier. Fixed-income AUM was $251.9 billion, down 2.9% and 11%, respectively; and multiasset and balanced funds were a combined $124.8 billion, down 10.2% and 12.5%, from the prior dates. Cash totaled $10.1 billion, up 8.6% from Sept. 30 and 53% higher than Dec. 31, 2017.

Franklin's fiscal first-quarter operating revenue totaled $1.412 billion, down 7.5% from the previous quarter and 12.6% lower than the year-earlier quarter. Net income was $275.9 million, down 45% and 147.3%, respectively.

Mr. Johnson's commentary noted that Franklin Resources' assets under management also were affected by the adoption of new accounting methods that changed the fair value of some equity securities, which affected its income in the most recent quarter.