Franklin Templeton buying Putnam Investments from Great-West Lifeco

By Steve Gelsi

Franklin Resources Inc. (BEN), the parent of investment firm Franklin Templeton, on Wednesday said it would acquire Putnam Investments from Great-West Lifeco for about $925 million, amid fee pressure and consolidation in the asset management business.

The deal marks a significant acquisition for Franklin Resources as traditional asset managers that built their business on stocks and bonds look to diversify into other areas such as insurance.

Franklin Resources said the deal will also help it expand its business managing defined contribution assets such as 401(K)s.

"Putnam will add complementary capabilities to our existing specialist investment managers to meet the varied needs of our clients and will increase Franklin Templeton's defined contribution AUM," Franklin Resources CEO Jenny Johnson said in a statement.

In the case of Franklin Resources, the firm will start managing $25 billion in insurance assets from Great-West. Great-West will become a 6.2% shareholder in Franklin Resources as part of the deal.

Founded in 1937, Putnam Investments currently manages about $136 billion in assets.

"Putnam's complementary capabilities and track record of strong investment performance accelerates Franklin Templeton's growth in the retirement markets by increasing its defined contribution assets under management (AUM) and expanding its insurance assets, while adding further scale and efficiency to Franklin Templeton's mutual fund platform," Franklin Templeton said.

Morgan Stanley & Co. LLC and Rockefeller Capital Management served as financial advisers on the deal.

Franklin Templeton stock was down 2.8% on Wednesday.

Franklin Resources Executive Vice President Adam Benjamin Spector said on the firm's quarterly call with analysts on May 1 that fee pricing continued to be under pressure, with industry consolidation as one factor.

"Where we've seen the pricing move the most is in the traditional large asset classes, fixed income, equity, especially U.S. and fixed income -- those have ground down to a point, but I think they've hopefully hit a bottom here," Spector said. "We also see mandates coming in generally at larger sizes, which has obviously a significant impact on fees. And as we see consolidation in the industry among players, that's impacting things."

Prior to the Putnam Investments acquisition, Franklin Resources ended the year as the world's ninth-largest asset manager with $1.39 trillion in assets, according to a list published by the Sovereign Wealth Fund Institute.

Close rivals include Blackstone Inc. (BX) with $974.7 billion in AUM, Wellington Management Inc. with $1.4 trillion, T. Rowe Price Group Inc. (TROW) with $1.35 trillion and Invesco Ltd. (IVZ) with $1.48 trillion.

They're all facing off against mega-giants such as BlackRock Inc's (BLK) $9.1 trillion in AUM and Vanguard's $8.1 trillion.

Insurance assets have also been in the spotlight, with Apollo Global Management's Athene unit and Blackstone's $500 million investment last year in Resolution Life. In 2022, Blackstone inked a deal with American International Group Inc.'s (AIG) retirement and life unit now listed under the name Corebridge Financial Inc. (CRBG).

For its part, Great-West is part of the Power Group of Companies, which also includes IGM Financial . The Power Group's AUM of about $2.1 trillion includes Great-West's Empower unit in the U.S., plus Canada Life in Canada and Irish Life in Europe.

IGM's subsidiaries include Mackenzie Financial and IG Wealth Management; it also has investments in Rockefeller Capital Management and China Asset Management Co.

-Steve Gelsi

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05-31-23 1247ET

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