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Franklin Resources Inc BEN

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Morningstar’s Analysis

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Economic Moat




Improved Outflows and Market Gains Lift Franklin's Q3 AUM; No Change to FVE

Greggory Warren, CFA Sector Strategist

Analyst Note

| Greggory Warren, CFA |

There was little in narrow-moat-rated Franklin Resources' fiscal third-quarter results that would alter our long-term view of the firm, and we are leaving our $23 fair value estimate in place. The company closed out the June quarter with $622.8 billion in assets under management. Organic growth and market gains will probably be constrained in the near to medium term by the impact that the COVID-19 pandemic is likely to have on economic growth and the equity and credit markets. During the March quarter, Franklin lost close to 17% of its AUM due to market losses and outflows. While it gained some of this back during the June quarter, with AUM rising just over 7% as market gains offset continued outflows from operations, we envision a stand-alone Franklin generating negative 9%-11% organic growth for all of fiscal 2020 (albeit at the lower end of that range). The key unknown here is the level of merger-related outflows that might linger after Franklin closes the Legg Mason acquisition at the end of July.

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Company Profile

Business Description

Franklin Resources provides investment services for individual and institutional investors. At the end of August 2020, Franklin had $1.441 trillion in managed assets, composed primarily of equity (31%), fixed-income (46%), multi-asset/balanced (10%) funds, alternatives (8%) and money market funds (5%). Distribution tends to be weighted more toward institutional (51% of AUM) investors, as opposed to retail investors (47%) and high-net-worth (2%) clients. Franklin is also one of the more global firms of the U.S.-based asset managers we cover, with more than 40% of its AUM invested in global/international strategies and close to a third of managed assets sourced from clients domiciled outside the United States.

One Franklin Parkway
San Mateo, CA, 94403
T +1 650 312-2000
Sector Financial Services
Industry Asset Management
Most Recent Earnings Jun 30, 2020
Fiscal Year End Sep 30, 2020
Stock Type High Yield
Employees 9,500