The paragraph details the introduction of the Franklin Resources earnings conference call for the quarter ending on March 31, 2025. The call is being hosted by Selene Oh, the Head of Investor Relations, who notes that it will include forward-looking statements subject to various risks and uncertainties and that these are detailed in Franklin's SEC filings. Jenny Johnson, the President and CEO, along with Matt Nichols, CFO and COO, and Adam Spector, head of global distribution, will address quarterly results and answer questions. Jenny acknowledges the first few months of 2025 have experienced significant market instability due to geopolitical trade policies and economic uncertainties.

The paragraph discusses how Franklin Templeton is positioned to assist clients in navigating market volatility and benefiting from emerging trends. The firm's diversified nature allows it to support a wide range of clients through various market conditions. Despite volatility, client activity remains strong, with an increased unfunded institutional pipeline. Franklin Templeton's strength lies in its specialist investment managers offering expertise across multiple asset classes, which is appealing as asset owners consolidate relationships with comprehensive managers. The firm provides industry insights and educational resources, such as webinars, to help clients understand market changes and identify opportunities. Franklin Templeton has a significant international presence, starting with its first office in Taiwan in 1986.

The paragraph discusses the global asset management firm’s operations, highlighting its substantial international presence and assets under management outside the US. It notes a shift in global market dynamics, with several foreign markets outperforming US indices for the first time in years. This shift was accompanied by a weakening US dollar and sector rotations in equity markets, with Europe outpacing the US and significant movements in commodities like Bitcoin and gold. The firm observes a broadening equity performance, moving beyond the narrow leadership of major tech companies, and identifies sectors like financials, healthcare, and utilities as market leaders. Looking ahead to late 2025, the firm maintains a cautiously optimistic outlook on global equities, tempered by uncertainties over US economic growth, federal employment cuts, and trade tensions, particularly with China.

The paragraph discusses concerns about profitability erosion due to weaker global economic activity and margin pressures from tariffs affecting supply chains. It highlights a trend among US equity investors seeking companies with durable earnings and favorable valuations amid declines in the technology sector, while European stocks may gain from increased government spending on defense and infrastructure. Despite potential global growth drags from tariffs, a US recession is not considered inevitable, as the US economy is more insulated due to its large size and smaller reliance on exports. Market volatility has been influenced by uncertainty around US trade policy, emphasizing the need to address trade and fiscal deficits. The US economy began 2025 robustly, but a recent GDP contraction and weakened confidence indicators suggest potential underlying activity slowdown, although household consumption and labor markets remain strong.

The paragraph discusses the potential impact of U.S. administration policies on economic growth, suggesting that a focus on tax cuts, deregulation, and trade negotiations could help avoid recession. Despite bond yield volatility, a rate cut by the Federal Reserve is expected. Trade tensions and fiscal deficits may pressure yields. High market volatility is anticipated until policy clarity improves. In private markets, optimism for a business-friendly environment in 2025 is tempered by global equity setbacks. Increased volatility may boost interest in secondary private equity offerings, presenting buying opportunities. Additionally, alternative credit markets, like direct lending and real estate credit, are considered attractive in this environment due to Benefit Street Partners' conservative underwriting and portfolio management skills.

The paragraph discusses Franklin Templeton's investment activity amid declining real estate valuations and global market volatility, noting selective opportunities in sectors like industrials, housing, and healthcare. The company maintains a diversified unfunded pipeline, especially strong in fixed income. Despite challenges, assets under management ended the quarter at $1.54 trillion, a decrease due to outflows and negative markets. Long-term inflows increased by 9% quarter over quarter, with multi-asset and alternatives contributing $9.7 billion in positive net flows. Equity inflows were strong, though there were $5.4 billion in net outflows due to a risk-off environment. Fixed income faced $30.5 billion in net outflows.

The paragraph discusses Franklin Templeton's strong performance and future opportunities in the fixed income and alternatives sectors. Excluding Western, fixed income net inflows reached $2.8 billion, with positive participation in multisector munis, stable value, and high yield strategies. The alternatives segment generated $6.8 billion, predominantly from private market assets. The firm is actively targeting wealth management channels, particularly in democratizing alternative investments, projecting $800 billion of industry-wide allocation over five years. Franklin Templeton has acquired relevant capabilities, established a distribution effort, and successfully placed products on leading platforms, with over 10% of their alternative assets now deriving from wealth channels. New offerings include their first perpetual secondaries private equity fund, the Franklin Lexington Private Market Fund, raising a combined $2 billion for wealth channel clients and complementing existing real estate debt and equity strategies.

Since January, the company has become one of the top 10 largest fundraisers of perpetual funds and the largest traditional asset manager. It experienced net inflows of $3.3 billion in multi-asset categories, led by platforms like Franklin Templeton Solutions and others. Investment vehicles such as ETFs and retail SMAs saw strong demand, with the ETF business recording its fourteenth straight quarter of positive net flows and a record AUM of $37 billion. It launched the Franklin Crypto Index ETF for indirect exposure to Bitcoin and Ethereum. The retail SMA market, experiencing significant growth, anticipated reaching $3.6 trillion by 2027. The company reported $144.2 billion in retail SMA AUM with net inflows of $1.5 billion and excluding certain figures, record inflows of $3.2 billion. Its non-US business had positive net flows, with AUM reaching around $470 billion, benefitting from geographic diversification.

The mutual fund's assets under management (AUM) have shown strong investment performance, with over half outperforming their peer median over various timeframes. Financial results show a decline in adjusted operating income due to increased compensation expenses, but efforts are being made to manage expenses effectively. Western is integrating some corporate functions with Franklin Templeton to improve efficiencies, while its investment team retains autonomy. The company remains committed to its five-year plan, focusing on public and private market distribution, private wealth management, and advancements in digital assets and technology to provide long-term value to clients and shareholders.

In this paragraph, Franklin Templeton discusses the consolidation of their New York-based employees into a single modern office space at One Madison Avenue, highlighting the positive feedback received from hosting global clients there. The company emphasizes its commitment to helping clients achieve financial milestones and its ability to adapt in a changing industry. They mention having a diversified investment platform to mitigate risks and express gratitude to their employees for prioritizing clients. The paragraph transitions into a Q&A session with Benjamin Budish from Barclays Capital asking about fiscal year expense guidance in the context of market dynamics and assets under management pressures.

Matt Nicholls provides a financial overview and future guidance for the company. As of the end of April, the Assets Under Management (AUM) were approximately $1.535 trillion, slightly below the starting figure due to market volatility. For the third quarter, the effective fee rate is expected to remain around 38 basis points, possibly increasing in the fourth quarter. Compensation and benefits are projected at $810 million, assuming $50 million in performance fees, while IT costs rise to $155 million due to an additional vendor. Occupancy costs should remain flat at about $70 million, with General and Administrative expenses staying similar to the current quarter at $185 million. For the full year 2025, expenses, excluding performance fee compensation and factoring in an additional quarter of Putnam, are expected to be similar to 2024. The company continues to invest strategically in areas such as alternative assets and digital solutions, funded by cost savings in other parts of the business.

In the paragraph, the speaker discusses the company's financial expectations for fiscal years 2025 and 2026. They anticipate that expenses for fiscal 2025 will remain flat compared to the previous year, after adjusting for factors like Putnam and performance fees. They emphasize being disciplined in redirecting savings towards significant growth areas. The speaker notes challenges related to revenue declines in the Western business but highlights ongoing expense initiatives at Franklin and Western, expecting these to result in $200-$250 million in cost savings by fiscal 2026. Additionally, they point out that growth in alternative assets may lead to higher expenses. The discussion then moves to a question about the positive net flow trend, excluding Western, and an inquiry into the base fee organic growth rate when including Western.

The paragraph discusses the financial performance and growth of a company, highlighting that despite challenges, the firm experienced positive net flows and growth in various sectors. Excluding Western, fixed income flows were notably strong with Franklin fixed income seeing a significant increase. The company also saw impressive fundraising in private markets and alternatives, as well as growth in multi-assets and ETFs. Their separately managed accounts (SMA) business is growing, though complex, and they are expanding their institutional presence. Overall, the company is outperforming the industry in key growth areas and regions.

The paragraph discusses the positive outlook for Putnam's performance, noting a significant increase in inflows quarter over quarter following an acquisition. It highlights the advantages of combining strong performance with a global distribution platform, particularly in volatile markets where active management is emphasized. The speaker mentions that active managers focus on risk-adjusted returns and that market volatility benefits them. The text also emphasizes the importance of local management capabilities in growing markets like India. Matt Nicholls adds that the effective fee rate for Western is around 15.8 to 16 basis points and notes flat performance in a volatile April, suggesting that monthly results can vary but impact quarterly outcomes.

In the discussion, Adam Spector highlights the strong sales performance of their business, even in segments where the industry is shrinking, such as active equity, with gross sales increasing for six consecutive quarters. The business has seen growth across all regions and asset classes, with sales diversified across equities, fixed income, alternatives, and multi-asset classes. Fees will be influenced by the asset mix given the business's diversified strategy. Alex Blostein of Goldman Sachs inquires about the performance of private markets, particularly retail products amidst market volatility, and references Lexington's upcoming large flagship secondary fund. Jenny Johnson is asked to elaborate on trends and growth aspirations for private markets management fees in the next year.

The paragraph discusses fundraising in private markets, stating that they have raised $10.4 billion, nearing the lower end of the projected $13-$20 billion range. Although a September close for Lexington was anticipated, it's now delayed to late 2025 or early 2026. The recent quarter raised $6.1 billion from various managers, including BSP, Alcetra, Clarion, Lexington, and Franklin Venture, with Lexington contributing $2.1 billion. Despite delays, they're expected to reach the midrange of their target, bolstered by positive flows in other areas. The paragraph highlights significant growth opportunities, noting that advisors currently allocate 5% to alternatives, with potential growth to 15%, equating to $800 billion or even up to $4 trillion according to some estimates.

The paragraph discusses the firm's unique position in selling alternative investments in the wealth channel, highlighting the importance of platform inclusion, educating financial advisers, and leveraging product capabilities. The firm has developed three successful perpetual products and built a specialized team to support market leaders in selling these products. It emphasizes the opportunity in secondaries, despite the challenge that limited partners (LPs) face with reduced cash flows from realizations, which have decreased from 20-24% to half of their assets under management (AUM) in alternatives, prompting LPs to seek funds like Lexington's to support future opportunities.

The paragraph discusses the opportunities and strategies for scaling the Evergreen Fund alongside traditional funds, emphasizing that there are no concerns about capital allocation. Fund managers recognize the potential in the secondary space and are eager to participate to avoid missing out on current opportunities. Lexington aims to make its new fund larger than their previous Fund 10, with the belief that the Flex and Evergreen Funds attract a different clientele, thus reducing concerns about cannibalization. Adam Spector adds that launching three scaled perpetual investment vehicles allows for continual market presence and ongoing engagement with advisors, which aids in raising capital. This approach benefits not only the Lexington flagship fund but also other products like co-investments and continuation vehicles. The paragraph concludes with a transition to Dan Fannon from Jefferies, who asks about fixed income flows.

The paragraph discusses the performance and strategies of Western, a $245 billion asset manager. Despite experiencing $10 billion in outflows, Western has managed $5 billion in gross sales and maintains strong institutional relationships, particularly with insurance companies. The firm is receiving inflows into its core and core plus franchises, and institutional interest continues. Jenny Johnson highlights the strength of their diversified model, allowing them to capture opportunities in the fixed income market despite challenges. Adam Spector is mentioned to further discuss specific successful fixed income strategies.

The paragraph discusses the areas of financial success, highlighting strong performance in Munis with a billion dollars raised, stable value, high yield, and the insurance sector. The firm also saw significant activity in CLOs with $2 billion raised and in short duration products, which are popular among both retail and institutional clients during uncertain interest rate conditions. There's optimism about potential growth in non-dollar fixed income products if macroscopic conditions are favorable. Additionally, it mentions that despite volatility, the firm expects flat flow numbers in April. Regarding forward strategy, about half of the unfunded pipeline involves fixed income, with Franklin fixed income being the largest component. Finally, Michael Cyprys from Morgan Stanley inquires about the firm's international business, particularly its revenue and flow contributions and areas of traction overseas.

The paragraph discusses the global sales strategies and market trends of the company as articulated by executives Jenny Johnson and Adam Spector. The company is active in over 30 countries, tailoring its offerings to local preferences. They notice regional trends, such as Australia favoring alternative investments and Asia focusing on income-oriented products. The company's business in Asia is more institutionally focused, while Canada involves more retail distribution. This quarter, the Asia-Pacific region faced challenges due to institutional clients derisking, impacting the firm's higher-risk asset allocations. Nevertheless, they remain net flow positive in EMEA and the Americas, with around $470 billion in assets under management outside the U.S. and an overall increase in gross sales globally.

In the paragraph, Bill Katz asks for clarification about financial flows at WAMCO, particularly concerning a $10 billion figure. Jenny Johnson explains it as a net outflow, which includes $5 billion in gross sales, highlighting ongoing client allocations despite redemption pressures. She notes the challenges for traditional managers to build a stable of alternative investment capabilities organically and acknowledges their write-off attempt with the Climate Alpha Fund. Johnson feels confident in her firm's current products, particularly mentioning a real estate debt fund that originated from a conversation with the BSP team, who manage substantial real estate debt assets.

The paragraph discusses a collaboration between two leadership teams, emphasizing the benefits of partnerships in real estate and financial services. It highlights a retrenchment in regional bank real estate debt and a new product developed from a dialogue between two firms, Clarion and another unnamed entity. The text mentions a partnership with Apollo in the "DC space" and stresses the advantage of integrating insights from both public and private markets. The paragraph also touches upon the need for careful structuring of teams due to ethical and information walls and questions whether gatekeepers prefer managers to form their own partnerships or if they should be involved in selecting partners. The speaker is optimistic about their position, being open to collaborations and having the capability to independently develop products and opportunities.

The paragraph discusses Franklin Templeton's strategy and capabilities in private markets, particularly within the wealth channel. Jenny Johnson highlights the firm's strong distribution network and its emphasis on educating financial advisors about alternative investments. She mentions Franklin Templeton's global reach and scale, suggesting that this provides an advantage over firms that solely focus on alternative investments. While the firm is well-equipped to handle various asset classes, Johnson notes that infrastructure is one area not fully covered. Overall, the paragraph conveys the firm's commitment to leveraging its extensive resources to capitalize on expected growth in private markets.

The paragraph discusses the success and challenges faced by a financial firm in launching and managing perpetual investment products, such as private credit real estate and secondaries. The firm experienced high demand, achieving significant scale quickly, and was able to raise substantial funds both domestically and internationally. However, managing this demand required careful deal sourcing to maintain performance quality. Initially, the firm worked with a limited number of partners to ensure a proper launch and escrow process but plans to expand its partnerships due to strong demand.

The paragraph discusses the variety of financial advisers, ranging from high-end private bankers with diversified portfolios to those new to alternatives. The focus is on educating advisers unfamiliar with alternatives, leveraging traditional reach to facilitate early access and subsequent sales. Matt Nicholls adds that they have some infrastructure investments and are looking to expand into private equity infrastructure, possibly through acquisitions. Brian Bedell from Deutsche Bank asks for clarification regarding a $470 billion figure, presumed to be by region rather than strategy, and inquires about their positioning if there's a shift from U.S. to non-U.S. strategies, and whether they can capture flows into non-U.S. strategies.

In this paragraph, Adam Spector discusses the trends and shifts in investor behavior and asset allocation. The firm has a significant portion of its assets under management ($470 billion) sourced from outside the United States. Recently, there has been a preference for non-dollar assets, which was a favorable investment decision, particularly in smaller cap markets, like German small and mid caps compared to their US counterparts. This has benefited their firm, which is known for its international and global equity products. Additionally, there has been a shift from growth to value stocks, as the future seems uncertain, making value stocks more attractive to investors. The firm has strengths in these areas, indicating that these trends are advantageous for them. The dialogue is part of a larger discussion, with Brian Bedell appreciating Spector's insights before the conversation shifts to a question from Patrick Davitt of Autonomous Research.

In the paragraph, Jenny Johnson, Matt Nicholls, and Adam Spector discuss the current status of their partnership with the Great Western group of companies. Out of the initial $25 billion commitment from Great Western, approximately $3 to $4 billion remains to be funded. The partnership is progressing as expected, with new opportunities being explored. Additionally, the Putnam aspect of the transaction has been successful, resulting in around $30 billion in net new flows since the deal closed. Adam Spector highlights recent success in securing significant mandates within the insurance channel. The call concludes with Jenny Johnson thanking participants.

The speaker expresses gratitude to the employees for their hard work and emphasizes the company's focus on people. They look forward to the next quarterly update, and the operator concludes the conference call.

This summary was generated with AI and may contain some inaccuracies.