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Franklin Resources(BEN) - 2025 Q2 - Earnings Call Transcript
BENFranklin Resources(BEN)2025-05-02 15:00
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Financial Data and Key Metrics Changes - Assets under management (AUM) decreased to 1,540billion,primarilyduetolong−termnetoutflowsatWesternAssetandnegativemarketimpacts[18][19]−Adjustedoperatingincomewas1,540 billion, primarily due to long-term net outflows at Western Asset and negative market impacts [18][19] - Adjusted operating income was 377.2 million, a decrease of 8.6% from the prior quarter, mainly due to compensation expenses and the impact of Western [27][28] Business Line Data and Key Metrics Changes - Long-term inflows increased by 9% quarter over quarter, with gross sales rising across all asset classes [19] - Multi-asset and alternatives generated a combined 9.7billioninpositivenetflows,whileequitylong−terminflowswere9.7 billion in positive net flows, while equity long-term inflows were 38.9 billion, despite net outflows of 5.4billioningrowthstrategies[20][21]−Fixedincomenetoutflowswere5.4 billion in growth strategies [20][21] - Fixed income net outflows were 30.5 billion, but excluding Western, there were net inflows of 2.8billion[20][21]MarketDataandKeyMetricsChanges−Theinstitutionalunfundedpipelineincreasedby2.8 billion [20][21] Market Data and Key Metrics Changes - The institutional unfunded pipeline increased by 2.3 billion to 20.4billion,thehighestlevelsince2022[5]−Internationalmarketsaccountedforapproximately20.4 billion, the highest level since 2022 [5] - International markets accounted for approximately 470 billion, or about 30% of AUM, with positive net flows in the EMEA and Americas regions [7][26] Company Strategy and Development Direction - The company aims to leverage market volatility to enhance client asset growth through diversified investment solutions [4][17] - Focus on expanding alternative assets and wealth management channels, projecting 800billiontobeallocatedtodemocratizealternativesindustry−wideoverthenextfiveyears[22][64]−ContinuedintegrationofWesternAssettocreateefficiencieswhilemaintaininginvestmentteamautonomy[28]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementremainscautiouslyconstructiveonglobalequitymarkets,citingconcernsoverUSgrowthandtariffimpacts[10][11]−ThecompanyanticipatesthatarecessionintheUSisnotaforegoneconclusion,withtheeconomybeingbetterinsulatedcomparedtoexport−dependentcountries[11][12]−Positivesentimentaroundthepotentialforgrowthinprivatemarketsandalternatives,withastrongfocusoneducatingfinancialadvisers[63][64]OtherImportantInformation−Thecompanylauncheditsfirstperpetualsecondaryprivateequityfund,raisinganinitial800 billion to be allocated to democratize alternatives industry-wide over the next five years [22][64] - Continued integration of Western Asset to create efficiencies while maintaining investment team autonomy [28] Management's Comments on Operating Environment and Future Outlook - Management remains cautiously constructive on global equity markets, citing concerns over US growth and tariff impacts [10][11] - The company anticipates that a recession in the US is not a foregone conclusion, with the economy being better insulated compared to export-dependent countries [11][12] - Positive sentiment around the potential for growth in private markets and alternatives, with a strong focus on educating financial advisers [63][64] Other Important Information - The company launched its first perpetual secondary private equity fund, raising an initial 2 billion [23] - The ETF business saw its fourteenth consecutive quarter of positive net flows, attracting 4.1 billion during the quarter [24][25] Q&A Session Summary Question: Guidance on fiscal year expenses given market movements - Management expects effective fee rates to remain around 38 basis points, with expenses projected to be flat compared to 2024 [36][39] Question: Estimate for base fee organic growth rate including Western - Management noted that long-term net flows excluding Western were about 7.4 billion, with positive flows in fixed income and alternatives [45][46] Question: Update on fixed income strategies and Western's health - Western experienced 10billioninoutflowsbutalsohad10 billion in outflows but also had 5 billion in gross sales, indicating ongoing institutional interest [78][79] Question: Contribution of international business to revenues and flows - The company reported positive momentum in gross sales across all regions, with AUM outside the US at approximately $470 billion [92]