Franklin Templeton hits record US$1.8 trillion as private markets run ahead of target

Every global manager is telling advisers the same story right now. Public and private markets are converging, and the flows are following. Franklin Templeton’s third-quarter numbers put hard figures behind that claim.

They also show where the firm is spending its effort. Private markets fundraising has already cleared the full-year target with a quarter still to run.

A record US$1.8 trillion, built on markets and flows

Start with the headline number. Franklin Templeton reported total assets under management of US$1.79 trillion for the quarter ended 30 June. That is a record for the firm, and a 7 per cent jump on the previous quarter.

Chief executive Jenny Johnson credited strong equity markets and positive net flows across every asset class and region the firm operates in.

The flow numbers back her up. Long-term net inflows for the quarter reached US$18.4 billion, taking the fiscal year-to-date total to US$63.3 billion. Over the same nine months last year the firm posted net outflows of US$85.5 billion, so the turnaround is stark.

Equity assets under management (AUM) did the heaviest lifting, climbing 13 per cent over the quarter to US$756.9 billion. Market gains drove most of that, rather than fresh client money.

Alternatives tell the more interesting growth story

Alternative AUM reached a record US$294.2 billion after the firm raised US$11.8 billion during the quarter. That included US$10.3 billion across secondary private equity, alternative credit, real estate and venture capital strategies.

Fiscal year-to-date private markets fundraising has already reached US$33.0 billion, beating the firm’s full-year target with one quarter still to run.

Johnson sees the record number in context.

“Investors are increasingly seeking partners that can deliver integrated solutions across public and private assets.”

Advisers repeating that number to clients should know one thing first. Under a reporting change the firm introduced this fiscal year, uncalled capital commitments count as long-term inflows the moment clients commit them, not once the money is drawn down and starts earning fees. Part of that headline figure therefore remains undeployed.

Johnson expects that momentum to keep building across asset classes, investment vehicles and geographies.

Demand holds up elsewhere too

ETFs, retail SMAs and Canvas, the firm’s custom portfolio platform, all held client interest, and the institutional won-but-unfunded pipeline grew to a record US$28.6 billion.

International AUM reached about US$525 billion, another record, with growth across Europe, the Middle East and Africa, Asia-Pacific and the Americas outside the US.

One caveat before comparing that figure with prior quarters. Franklin reclassified Cayman-domiciled money market assets out of the non-US Americas bucket and into the United States this fiscal year, and folded India into Asia-Pacific from January. Neither change reflects client money moving.

Earnings, one-offs and capital returns

Net income attributable to the company fell to US$171.5 million for the quarter, down 36 per cent on the previous quarter. A one-off US$100 million charge to settle a legacy US Securities and Exchange Commission matter accounted for most of that fall.

Adjusted net income, which strips out the settlement and other one-off items, held roughly flat at US$386.3 million. That figure gives the cleaner read on the underlying business.

The firm still returned US$521.5 million to shareholders during the quarter. That included US$348.1 million in share buybacks and a quarterly dividend of US$0.33 a share, up 3 per cent on a year earlier.

The parent company dropped the Franklin Resources name in August and now trades as Franklin Templeton, Inc. The NYSE ticker stays BEN.

What advisers should watch from here

For advisers, the more useful question lies past the headline AUM figure. It is whether the private markets build-out turns into structures Australian investors can reach: evergreen funds, interval funds and SMA-style private market sleeves.