There was little in Franklin Resources' fiscal second-quarter results that would alter our long-term view of the narrow-moat firm. We expect to leave our $28 per share fair value estimate in place. We view the company's shares as being modestly undervalued right now.
Franklin is one of the 20 largest U.S.-based asset managers, with just over 70% of its AUM sourced from domestic clients. It is the fifth-largest global manager of cross-border funds.
Bears
Franklin's mutual funds continue to underperform, with just 51%, 50%, and 37% of its AUM above peer medians on a one-, three-, and five-year basis, respectively, at the end of December 2023.
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Franklin Resources provides investment services for individual and institutional investors. At the end of October 2023, Franklin had $1.335 trillion in managed assets, composed primarily of equity (31%), fixed-income (35%), multi-asset/balanced (11%) funds, alternatives (19%) and money market funds (4%). Distribution tends to be weighted equally between retail investors (50% of AUM) and institutional accounts (48%), with high-net-worth clients accounting for the remainder. Franklin is one of the more global of the U.S.-based asset managers we cover, with more than a third of its assets under management invested in global/international strategies and 29% of managed assets sourced from clients domiciled outside the United States.