Franklin Resources, Inc. (BEN) 2024 Q3 Earnings Call Summary

Optimistic Highlights

• Record Market Milestones

  The S&P 500 and Nasdaq 100 reached historic highs, indicating strong market performance.

• Investment Opportunities

  Broadening equity allocations and active management are expected to benefit from current market trends.

• Positive AUM Growth

  Ending AUM was $1.65 trillion, a 15% increase from the previous year, primarily due to the addition of Putnam and positive markets.

• Strong Investment Performance

  A significant portion of strategy composite AUM outperformed their benchmarks across various time periods.

• Success in Alternatives and Multi-Asset Strategies

  Notable net inflows in alternatives and multi-asset strategies, with significant capital raised for alternative credit and secondary private equity.

Pessimistic Highlights

• Market Pullback

  A recent pullback in July due to disappointing Big Tech earnings and a shift from growth to value stocks.

• Long-term Net Outflows

  Long-term net outflows were $3.2 billion, indicating challenges in retaining and attracting investment funds.

Company Outlook

• Continued Diversification

  Franklin Templeton aims to diversify across asset classes, investment vehicles, and geographies to sustain growth.

• Focus on Technology and Innovation

  Investments in AI, blockchain, and a strategic partnership with Microsoft and Envestnet to enhance client outcomes.

• Expansion in Alternatives and Wealth Management

  The company plans to further grow its alternatives and wealth management businesses, leveraging its global platform.

Q & A Highlights

• Q: Can you discuss the operational benefits and expense benefits of the Aladdin platform? (Alex Blostein, Goldman Sachs)

  A: Implementation costs are expected to be approximately $100 million over the next three to five years, with savings of about $15 million per annum starting around fiscal 2028. The platform unifies investment management technology across public market businesses, leading to efficiency and cost savings. (Matthew Nicholls)

• Q: Could you provide an update on Lexington's deployment of Fund 10 and the threshold for launching the next flagship fund? (Brennan Hawken, UBS)

  A: Lexington has been deploying Fund 10 faster and at higher discounts than historical, potentially entering the market sooner for the next fund. They are also focusing on middle market and co-investment strategies. (Jennifer M. Johnson)

• Q: Can you discuss the incremental upside to the relationship with Great-West beyond the $25 billion AUM allocation? (Craig Siegenthaler, Bank of America)

  A: The relationship with Great-West Lifeco is expected to grow over time, with ongoing product development and newer products for the retirement platform and insurance side. (Adam B. Spector)

• Q: How do you plan to expand the ETF franchise and connect it with the new Aladdin platform? (Brian Bedell, Deutsche Bank)

  A: The ETF strategy focuses on active, passive, smart beta, and digital assets, aiming to be vehicle agnostic and meet market demand. The Aladdin platform will support this by offering a unified investment management technology. (Jennifer M. Johnson)

• Q: What are the opportunities in Japan with the JV with SBI, and how does it tap into the opportunity set in that market? (Michael Cyprys, Morgan Stanley)

  A: The JV with SBI Holdings aims to launch ETFs and digital assets, leveraging SBI's reach in Japan to tap into the evolving market and investor demand for innovative strategies. (Jennifer M. Johnson)