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Franklin's March AUM Falls Slightly

Zacks Equity Research


Franklin Resources Inc. (BEN) declared preliminary assets under management (:AUM) of $725.7 billion by its subsidiaries for the end of March 2012. The company’s results witnessed a slight fall from $727.4 billion as of February 29, 2012 and an increase of 3.2% from $703.5 billion as of March 31, 2011.

Month-end total equity assets came in at $299.9 billion, down 0.4% sequentially and 2.9% on a year-over-year basis. Of the total equity assets, roughly 72% were from international sources, while the remaining 28% were from the U.S.

Total fixed income assets were $316.5 billion, down 0.2% from $317.2 billion as of February 29, 2012, significantly increasing from $275.2 billion as of March 31, 2011. Of the total, tax-free assets accounted for only 24%, while the rest 76% were taxable.

Franklin recorded $103.6 billion in hybrid assets, up 0.9% from $102.7 billion as of February 29, 2012, but down 8.6% from $113.4 billion as of March 31, 2011. Cash management funds, as reported, were $5.7 billion, down from $6.4 billion recorded in the prior month and $6.0 billion as of March 2011.

On a quarterly basis, as of December 31, 2011, total AUM was $670.3 billion, up from $659.9 billion as of September 30, 2011, attributed to market appreciation, partly offset by net new outflows. However, AUM remained flat on a year-over-year basis, as market depreciation of $27.4 billion offset the net new flows of $17.6 billion and $12.5 billion from acquisitions.

Simple monthly average AUM during the quarter decreased 6% sequentially and increased 3% y/y to $675 billion. Net new outflows were $15.6 billion versus inflows of $3.1 billion in the prior quarter and $3.2 billion in the prior-year quarter.

Our Take

Among Franklin’s peers-Invesco Ltd. (IVZ) is expected to report month-end AUM for the month of March 2012, later this week.

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. Further, the company’s completed acquisitions, in calendar year 2011, are expected to strengthen its financials. However, the regulatory restrictions and sluggish economic recovery could mar the AUM growth while increasing its costs.

Franklin currently retains its Zacks #2 Rank, which translates into a short-term ‘Buy’ rating. However, considering the company’s business model and fundamentals, we maintain our long-term “Neutral” recommendation on the stock.

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