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Franklin July AUM Descends, Equity & Hybrid Assets Down

Zacks Equity Research

Franklin Resources Inc. (BEN) declared preliminary assets under management (AUM.TO) of $907.9 billion by its subsidiaries for Jul 2014. The company’s results exhibited a decline of 1.4% from $920.5 billion as of Jun 30, 2014. However, it surged 8.8% from $834.1 billion as of Jul 31, 2013.

Month-end total equity assets came in at $380 billion for Franklin, down 2.1% from the prior month while it climbed 15.5% on a year-over-year basis. Of the total equity assets, around 71% were from international sources, while the remaining 29% were from the U.S.

Total fixed income assets were $361.4 billion, down slightly from the prior month and about 1% from $364.4 billion as of Jul 31, 2013. Overall, tax-free assets accounted for only 20% of the fixed income assets, while the remaining 80% were taxable.

Franklin recorded $160.1 billion in hybrid assets, which declined 1.5% from $162.5 billion in the prior month but jumped 19.1% from $134.4 billion in the prior-year month.

Cash management funds were reported at $6.4 billion, in line with the prior month as well as the prior-year month.

Quarterly Performance

On a quarterly basis, as of Jun 30, 2014, total AUM was $920.5 billion, up from $815.0 billion as of Jun 30, 2013, driven by market appreciation of $116.9 billion, partially offset by $7.2 billion of net new outflows. Simple monthly average AUM of $902.8 billion during the quarter climbed 8% year over year. Notably, net new inflows of $2.6 billion were recorded in the quarter.

Our Viewpoint

Franklin's global footprint is a 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.

Franklin currently carries a Zacks Rank #3 (Hold). However, a better performing company in the same industry with a Zacks Rank #1 (Strong Buy) is AllianceBernstein Holding L.P. (AB).

Among other asset managers, Invesco Ltd. (IVZ) reported a slight fall in preliminary month-end AUM for Jul 2014. The AUM for the month was $798.8 billion, down 0.4% from $802.4 billion at the end of Jun 2014.

Legg Mason Inc. (LM) is expected to release preliminary AUM for Jul 2014 later this week.

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