Franklin Resources, Inc. (BEN) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary indicates positive growth in various segments such as alternative asset fundraising, ETF platform net flows, and retail SMAs AUM. Despite flat adjusted operating income, the company shows resilience in integrating acquisitions and leveraging blockchain technology, which is positively viewed by analysts. The Q&A section reveals management's strategic focus on private markets and blockchain, although some uncertainty remains regarding the financial settlement with WAM. Overall, the company's strong market strategy, product development, and shareholder return plans contribute to a positive outlook for the stock price.
Key Financial Performance
Assets Under Management (AUM) $1.61 trillion, increased from the prior quarter due to positive markets and strengthening flows, partially offset by long-term outflows at Western Asset Management.
Institutional Pipeline of Unfunded Mandates $24.4 billion, a net increase of $4 billion from the prior quarter, driven by $14.8 billion in new wins reflecting strong client demand across all asset classes.
Long-term Net Outflows $9.3 billion, improved from the prior quarter's outflows of $26.2 billion. Excluding Western Asset Management, long-term net inflows were $7.8 billion this quarter.
Multi-Asset and Alternatives Net Flows $4.3 billion for the quarter, with multi-asset flows being positive for 16 consecutive quarters.
Equity Net Outflows $645 million, impacted by market volatility, but positive net flows were generated in large-cap value, international, and emerging market strategies.
Fixed Income Net Outflows $13 billion, improved from the prior quarter. Excluding Western Asset Management, fixed income net inflows were $3.5 billion, driven by Franklin Templeton Fixed Income and Brandywine Global.
Cash Management Net Inflows $2.7 billion in each of the last two quarters, increasing cash management AUM to $72 billion.
Alternative Asset Fundraising $6.2 billion for the quarter, with private markets assets totaling $5.3 billion. Fiscal year-to-date alternative asset fundraising reached $19 billion.
ETF Platform Net Flows $4.3 billion, achieving its 15th consecutive quarter of positive net flows and reaching $44.1 billion in AUM, a 19% growth from the prior quarter.
Retail SMAs AUM $156.3 billion, up 8% from the prior quarter, driven by growth in Putnam, Franklin Templeton Fixed Income, Canvas, and Franklin Income.
Adjusted Operating Income $378 million, flat from the prior quarter, driven by lower compensation expenses, offset by the impact of Western outflows and lower average AUM.
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Operating Highlights
Tokenized Money Market Fund: Launched an intraday yield feature on Benji, making investing faster, more transparent, and accessible 24/7.
Global Expansion: Expanded international business with positive net flows and new mandates in regions like Saudi Arabia and Uzbekistan. Became a trustee and manager of the $1.7 billion National Investment Fund of Uzbekistan.
European Private Credit: Acquired a majority interest in Apera Asset Management, expanding direct lending capabilities in Europe’s lower middle market.
Assets Under Management (AUM): AUM increased to $1.61 trillion, driven by positive markets and strengthening flows. Institutional pipeline of unfunded mandates rose to $24.4 billion.
Expense Discipline: Focused on operational efficiencies and expense discipline, maintaining adjusted operating income at $378 million.
Alternatives and Private Markets: Fundraising in alternatives reached $19 billion fiscal year-to-date, with $15.7 billion in private markets. Expanded private credit AUM to nearly $90 billion through acquisitions and investments.
Wealth Management Alternatives: Invested heavily in alternatives for wealth management, including perpetual funds and new products for private market investments in retirement plans.
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Risk or Challenges
Geopolitical and Policy Uncertainty: Ongoing geopolitical and policy uncertainty is causing caution in the U.S. equity market outlook, potentially impacting market stability and investor confidence.
Market Volatility: Heightened market volatility, driven by factors such as tariff announcements and geopolitical risks, poses challenges to investment performance and client confidence.
Tariff-Driven Price Pressures: Tariff hikes have led to price increases in specific goods, which could exert upward pressure on yields and impact inflation.
Private Markets Liquidity Constraints: Volatility in global equity markets has constrained IPOs and M&A activity, limiting liquidity options for investors in private markets.
Credit Deterioration Risks: Higher base rates, modest spread widening, and potential credit deterioration in private credit markets require more selective deployment and quality underwriting.
Real Estate Market Challenges: Real estate capital markets activity remains muted, with limited volume and challenges in certain property sectors, though industrial and multifamily sectors show resilience.
Western Asset Management Outflows: Long-term net outflows at Western Asset Management continue to impact overall AUM growth, despite improvements in other areas.
Dependence on Alternatives Growth: The company’s growth strategy heavily relies on alternatives, which may face challenges due to market volatility and selective investor deployment.
Regulatory and Trade Policy Risks: Shifting trade policies and elevated geopolitical risks could impact long-term private market outlook and investment strategies.
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Guidance & Outlook
U.S. Equity Market Outlook: Investment teams remain cautiously constructive on the U.S. equity market outlook. While supported by solid fundamentals, caution arises from the market's strong advance from its lows and ongoing geopolitical and policy uncertainty.
Interest Rate Projections: The Fed is expected to implement at most one more rate cut this year, with additional monetary easing possible if growth deteriorates. Tariff-driven price pressures and a large fiscal deficit may exert upward pressure on yields.
Private Markets Outlook: Private markets remain constructive with opportunities in secondary private equity, real estate, and commercial real estate debt. Trends such as growing net asset values, significant dry powder, and longer holding periods support this outlook.
Private Credit: Private credit remains an area of conviction, with increased market volatility creating opportunities in direct lending, real estate credit, and special situations. Quality underwriting and structure are emphasized.
Real Estate Market: Real estate capital markets activity remains muted, but top-performing sectors include industrial, multifamily, and self-storage. Overall property indices showed modestly positive performance, signaling a potential bottom after two years of decline.
Alternatives in Wealth Management: Significant opportunity exists for alternatives in wealth management, with institutions allocating 30% or more to alternatives compared to less than 5% for average wealth management clients. Franklin Templeton is developing products for broader client participation in private markets.
ETF Platform Growth: The ETF platform achieved its 15th consecutive quarter of positive net flows, reaching $44.1 billion in AUM, a 19% growth from the prior quarter. Putnam's ETF lineup has more than tripled in AUM since acquisition.
International Business Expansion: The international business continues to expand with positive net flows. Franklin Templeton is engaging with institutions in emerging markets, including Saudi Arabia and Uzbekistan, to broaden investment offerings and manage strategic mandates.
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Shareholder Return Plan
Return of Capital to Shareholders: Our balance sheet remains strong, providing flexibility to pursue strategic investments and return capital to shareholders.
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Key Q&A
Q:How does Franklin Templeton integrate acquisitions like Apera into its broader private credit platform?
A:Franklin Templeton integrates acquisitions like Apera into its broader private credit platform by leveraging the broader organization for sourcing and distribution. While parts of Apera will remain stand-alone, such as their $2.9 billion fund, the goal is to operate as a single $90 billion private credit manager. This approach allows for expertise in areas like middle market direct lending, asset-backed, and real estate debt to be globalized.
Q:What is Franklin Templeton's perspective on the impact of blockchain technology on the financial system?
A:Franklin Templeton believes blockchain technology will fundamentally change the financial system by disintermediating toll takers in transactions, reducing costs, and enabling innovation. They highlighted their tokenized money market fund, which offers intraday yield and efficiency benefits. They also foresee blockchain being adopted for mutual funds and ETFs due to its cost advantages.
Q:What updates were provided regarding Franklin Templeton's financial settlement with WAM and capital deployment?
A:Management highlighted the strength of their fixed income franchise, with Franklin Fixed Income and Brandywine in positive flows. Western Asset Management (WAM) has seen stabilization in outflows, but discussions with regulators on financial settlements are ongoing, with no reserves reported yet. Capital deployment priorities include dividends, organic growth strategies, share repurchases, debt servicing, and opportunistic acquisitions.
Q:What is Franklin Templeton's outlook for private markets growth over the next 12 months?
A:Franklin Templeton expects to raise around $18.5 billion in alternative fundraising for the year, with 25% coming from the wealth channel. They are seeing monthly inflows of $150-$200 million in perpetual products like Flex and real estate debt funds. They aim to grow the wealth channel's share of alternatives AUM to 20-30% over time.
Q:What guidance was provided for Franklin Templeton's expenses and fiscal outlook?
A:For the fiscal fourth quarter, Franklin Templeton expects adjusted expenses of $1.283-$1.285 billion, with performance fees contributing $100 million. For fiscal 2025, expenses are expected to be roughly flat compared to 2024, with $200 million in cost savings anticipated for fiscal 2026. Growth areas like alternative assets and acquisitions like Apera may slightly offset these savings.
Q:What are Franklin Templeton's plans for integrating private markets into 401(k) plans?
A:Franklin Templeton is exploring both partnerships and in-house solutions for integrating private markets into 401(k) plans. They have launched a partnership with Apollo and are working on target date funds with private markets, expected to launch by early 2026. However, uptake may be slow due to the litigious nature of the DC space.
Q:What trends are Franklin Templeton observing in non-U.S. allocations?
A:Franklin Templeton is seeing increased interest in non-U.S. strategies, driven by investment opportunities rather than political factors. Growth has been observed in emerging markets equity, international and global equity, and value strategies. On the fixed income side, there is interest in global bond, EM, high yield, and multi-sector products.
Q:What is Franklin Templeton's strategy for leveraging blockchain technology for economic success?
A:Franklin Templeton has built an ecosystem around blockchain, including a patented wallet that can operate across eight blockchains. They manage reserves for stablecoin providers and are in discussions with distributors to white-label their technology. They aim to integrate blockchain into traditional finance systems, providing a comprehensive view of clients' investments.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer regarding the financial settlement with WAM, stating that discussions with regulators are ongoing and that they do not control the pace of the process. They also did not provide specific details on reserves or potential charges.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AG Research
Adam Benjamin
Bank AG
Bedell Deutsche
Benjamin Spector
Bertram Bedell
Brian Bertram
Brooks Worthington
CEO Director
COO Selene
Chase Co
Co Research
Cowen Research
Cyprys Morgan
Director Nicholls
Distribution President
Division Brian
Division Conference
Division Cyprys
Division Fannon
Division Glenn
Division Kenneth
Division Raymond
ET Welcome
Equities Research
Executive VP
Glenn Schorr
Group Inc
ISI Institutional
Inc Research
Institutional Equities
JPMorgan Chase
Research Division
BEN Transcript
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Positive1-30
The earnings call reflects positive sentiment with strong equity flows, strategic M&A focus, and promising growth in alternative assets. The company’s emphasis on AI and blockchain for cost efficiency, alongside stable EFR and improving margins, indicates a solid financial strategy. Despite some lack of clarity in management responses, the optimistic guidance and strategic initiatives suggest a positive stock price movement over the next two weeks.
Franklin Resources, Inc. (BEN) Q4 2025 Earnings Call Transcript
Unknown11-7
The earnings call reflects a negative sentiment due to declining financial metrics such as operating income, margins, and EPS. Although there are optimistic elements like infrastructure investment and AI/tokenization efforts, the Q&A reveals unclear responses and challenges in fundraising. The company's expenses have increased, and while there is a cost-saving plan, it may not offset the negative financial performance. Overall, the negative aspects outweigh the positives, suggesting a likely stock price decline in the near term.
Franklin Resources, Inc. (BEN) Q3 2025 Earnings Call Transcript
Positive8-1
The earnings call summary indicates positive growth in various segments such as alternative asset fundraising, ETF platform net flows, and retail SMAs AUM. Despite flat adjusted operating income, the company shows resilience in integrating acquisitions and leveraging blockchain technology, which is positively viewed by analysts. The Q&A section reveals management's strategic focus on private markets and blockchain, although some uncertainty remains regarding the financial settlement with WAM. Overall, the company's strong market strategy, product development, and shareholder return plans contribute to a positive outlook for the stock price.
BEN Slides
BEN Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
