Franklin's January AUM Perks Up

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Franklin Resources Inc. (BEN) declared preliminary assets under management (:AUM) of $809.8 billion by its subsidiaries for Jan 2013. The company’s results witnessed a rise of 3.6% from $781.8 billion as of Dec 31, 2012. Moreover, it increased 15.0% from $704.3 billion as of Jan 31, 2012.

Month-end total equity assets came in at $318.2 billion, increasing 4.9% from the prior month, and 10.4% on a year-over-year basis. Of the total equity assets, around 73% were from international sources, while the remaining 27% were from the U.S.

Total fixed income assets were $360.5 billion, rising 2.5% from $351.7 billion as of Dec 31, 2012, and augmenting 16.3% from $309.9 billion as of Jan 31, 2012. Overall, tax-free assets accounted for only 24% of the fixed income assets, while the remaining 76% were taxable.

Franklin recorded $125.2 billion in hybrid assets, which edged up 3.5% from $121.0 billion in the prior month and surged 25.3% from $99.9 billion in the prior-year month.

Cash management funds were reported at $5.9 billion, surging 3.5% from the prior month but waning 6.3% from the prior-year month.

Quarterly Performance

On a quarterly basis, as of Dec 31, 2012, total AUM was $781.8 billion, up from $749.9 billion as of Sep 30, 2012, driven by market appreciation of $24.8 billion and $8.7 billion from an acquisition.

Simple monthly average AUM of $763.6 billion during the quarter climbed 5% sequentially. Net new flows were $0.3 billion versus $2.9 billion in the prior quarter.

Peer Performance

Among Franklin’s peers, Invesco Ltd. (IVZ) recorded a rise in its preliminary month-end AUM for Jan 2013. The AUM for the month was $712.6 billion compared with $687.7 billion at the end of Dec 2012. Favorable market returns as well as surge in both active and passive long-term inflows were the primary reasons for the rise. Yet, foreign exchange led to a $3.0 billion drop in AUM.

Another peer, Legg Mason Inc. (LM) reported marginal increase in its AUM as of Jan 31, 2013. Preliminary month-end AUM came in at $654.1 billion, up 0.8% compared with the prior month. Equity AUM and liquidity AUM were up in the month under review, though Fixed Income AUM declined.

Our Viewpoint

Franklin's global footprint is an exceptionally favorable strategic point as its AUM is well diversified. The company is also poised to benefit from its strong balance sheet. However, regulatory restrictions and sluggish economic growth could mar AUM improvement and alleviate costs. Additionally, higher expenses remain a matter of concern.

Franklin currently carries a Zacks Rank #3 (Hold). Among peers, companies in the same industry with a Zacks Rank #1 (Strong Buy) include Lazard Ltd. (LAZ).

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