Franklin Resources AUM up in quarter, down for year

Franklin Resources managed $622.8 billion as of June 30, up 7.3% from March 31 and down 12.9% from the prior year, its earnings report Tuesday showed.

Assets under management grew by $42.5 billion in the three months ended June 30, the third quarter of the money manager's fiscal year. The increase was attributable to $50.3 billion in net market change, distributions and other changes and $11.3 billion of net outflow, which was offset by $3.5 billion from the acquisition in May of wealth manager The Pennsylvania Trust Co. by Franklin's Fiduciary Trust International unit, the report said.

Net inflow improved the firm's investment strategies compared to the prior quarter, particularly in U.S. equities and municipal bonds, President and CEO Jennifer M. Johnson said during a call Tuesday with analysts.

Franklin's $11.3 billion of net outflow in the quarter ended June 30 was lower than the $25.4 billion of net outflow in the prior quarter, but higher than the $5.4 billion of net outflow in the second quarter of 2019.

Combined U.S. and international equity assets under management totaled $243 billion as of June 30, up 17.2% in the quarter and down 13.9% for the year.

Multiasset/balanced strategies totaled $129.3 billion as of June 30, up 9.3% from the prior quarter and down 4.9% from the same quarter a year earlier.

U.S. and international fixed-income AUM totaled $240.1 billion in the current quarter, down 1.6% compared to the quarter ended March 31 and down 16.6% from June 30, 2019.

Cash management funds totaled $10.4 billion as of the quarter ended June 30, down 2.8% from the previous quarter and up 13% from a year earlier.

Franklin's operating revenue was down 11.2% to $1.2 billion in the quarter ended June 30 and down 19.5% in the year.

Ms. Johnson told analysts on Tuesday's call that Franklin's acquisition of Legg Mason will close July 31 — earlier than expected. Legg Mason managed $783.4 billion as of June 30, bringing the combined assets of the two firms to $1.41 trillion as of June 30.

Ms. Johnson said the integration planning for the merger is going smoothly and senior appointments have been made in some areas and others will be announced over the next month or so. She noted that the new leadership team will be "a real combination of the two firms."

Franklin said the combined headcount of the two firms was reduced by about 8% as part of "identifying synergies," in a commentary accompanying the earnings release.

Franklin said layoffs were "limited to holding company functions and centralized distribution and do not involve any Franklin Templeton investment teams or the specialist investment managers that (are) part of Legg Mason, including distribution."

Ms. Johnson stressed on the call that "we have no intention of changing the investment teams."

In a response to an analyst question, Matthew Nicholls, executive vice president and chief financial officer, said because there has been no change in client-facing staff who have been engaged with existing investors, "so far, client retention has been very, very high with minimal redemptions" in relation to the merger.