Franklin is open to more acquisitions, CEO tells Morningstar conference

After Franklin Resources' big acquisition of Legg Mason in July 2020 as well as a purchases of two smaller companies since then, Jennifer M. Johnson, Franklin's president and CEO, said the firm still is on the lookout for more acquisitions.

Ms. Johnson said during a session Tuesday at the Morningstar Investment Conference in Chicago that the acquisition of Legg Mason, which increased the firm's assets by $797.4 billion and pushed Franklin's total assets under management above $1 trillion, was a "strategic long-term decision" for the company because it added strategies Franklin needed to expand its investment breadth including alternatives, core-plus fixed income and real estate. Ms. Johnson was responding to a question from moderator Sarah Bush, Morningstar's North American manager research practice leader.

Franklin Resources' AUM totaled $1.48 trillion as of March 31.

Ms. Johnson said there are three areas the firm might consider for future acquisitions.

One area for potential acquisitions is companies that would fill a product or geography gap, noting that investors globally overwhelmingly prefer to invest with managers in their own region, she said.

Franklin has a wealth management business that Ms. Johnson said the firm would like to expand possibly through acquisition.

The acquisition of more technology companies is the third area of potential acquisition because technology is critical for engaging with the firm's clients, especially fee-based advisers, noting that Franklin is investing in technology to meet the needs of this client segment.

Ms. Johnson told conference attendees that she's seeing the "democratization of private market strategies" adding there is strong demand from wealth management clients as well as from defined contribution plans to add to their lineups.

Franklin's three alternative investment units — Benefit Street Partners (private credit) Clarion Partners (real estate) and Lexington Partners (private equity secondaries and co-investments) — manage a total of $215 billion, she said.

Among other topics she discussed during the session, Ms. Johnson touched on the issue of environment, social and governance noting that "ESG will always be a question. We all should be attuned to ESG."

She added that the firm hired Anne Simpson in February as global head of sustainability.

Previously, Ms. Simpson was managing investment director for board governance and sustainability with the $450.7 billion California Public Employees' Retirement System, Sacramento.

Finally, Ms. Johnson also expressed her support for blockchain, noting that its "disruption is material" and mentioned that Franklin launched a venture capital blockchain fund in 2021.