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Franklin's August AUM Falls

Zacks Equity Research

Franklin Resources Inc. (BEN) declared preliminary assets under management (:AUM) of $817.3 billion by its subsidiaries for Aug 2013. The company’s results exhibited a fall of 2% from $834.1 billion as of Jul 31, 2013. However, it increased 11.8% from $731 billion as of Aug 31, 2012.

Month-end total equity assets came in at $323.7 billion for Franklin, down 1.6% from the prior month, but up 21.4% 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 $353.0 billion, declining 3.1% from $364.4 billion as of Jul 31, 2013, but augmenting 7.2% from $329.3 billion as of Aug 31, 2012. Overall, tax-free assets accounted for only 21% of the fixed income assets, while the remaining 79% were taxable.

Franklin recorded $133.8 billion in hybrid assets, which dipped 0.4% from $134.4 billion in the prior month but jumped 24.6% from $107.4 billion in the prior-year month.

Cash management funds were reported at $6.8 billion, up from $6.4 billion in the prior month but increasing 9.7% from the prior-year month.

Quarterly Performance

On a quarterly basis, as of Jun 30, 2013, Franklin reported total AUM of $815.0 billion, up from $707.1 billion as of Jun 30, 2012, driven by market appreciation of $73.8 billion and $29.9 billion of net new flows.

Simple monthly average AUM of $833.2 billion during the quarter climbed 17% year over year. Net new flows were $8.4 billion versus $4.8 billion in the prior-year quarter.

Among other asset managers, Legg Mason Inc. (LM) and Invesco Ltd. (IVZ) are expected to release their preliminary AUM for Aug 2013 by the end of this week.

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. Additionally, higher expenses remain a matter of concern.

Franklin currently carries a Zacks Rank #3 (Hold). However, a better performing company in the same industry with a Zacks Rank #2 (Buy) is Affiliated Managers Group Inc. (AMG).

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