Franklin Resources Q3 2025 Earnings Report

Franklin Resources EPS Results

• Actual EPS: $0.49
• Consensus EPS: $0.46
• Beat/Miss: Beat by +$0.03
• One Year Ago EPS: $0.60

Franklin Resources Revenue Results

• Actual Revenue: $2.06 billion
• Expected Revenue: $2.38 billion
• Beat/Miss: Missed by -$319.63 million
• YoY Revenue Growth: -2.20%

Franklin Resources Announcement Details

• Quarter: Q3 2025
• Date: 8/1/2025
• Time: Before Market Opens
• Conference Call Date: Friday, August 1, 2025
• Conference Call Time: 10:00AM ET

Franklin Resources (NYSE:BEN) is a publicly owned asset management holding company. Through its subsidiaries, the firm provides its services to individuals, institutions, pension plans, trusts, and partnerships. It launches equity, fixed income, balanced, and multi-asset mutual funds through its subsidiaries. The firm invests in the public equity, fixed income, and alternative markets. Franklin Resources, Inc. was founded in 1947 and is based in San Mateo, California with an additional office in Calgary, Canada; Dubai, United Arab Emirates; Edinburgh, United Kingdom; Fort Lauderdale, United States; Hyderabad, India; London, United Kingdom; Rancho Cordova, United states; Shanghai, China; Singapore; Stamford, United States; and Vienna, Austria.

Franklin Resources Q3 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Assets under management reached $1.61 trillion at quarter-end, driven by strong market performance and net inflows.
• Positive Sentiment: Excluding Western Asset, long-term net inflows totaled $7.8 billion and mark the seventh consecutive quarter of positive flows.
• Positive Sentiment: Alternatives fundraising hit $15.7 billion year-to-date, including $6.2 billion this quarter, keeping Franklin on track within its $13–20 billion annual guidance.
• Positive Sentiment: Agreed to acquire a majority interest in Apira Asset Management, boosting European middle-market direct lending and raising pro forma private credit AUM to nearly $90 billion.
• Neutral Sentiment: Launched an intraday yield feature on its tokenized money market fund, showcasing cost efficiencies and blockchain expertise for future distribution opportunities.

Presentation

[Operator]

Welcome to the Franklin Resources Earnings Conference Call for the quarter ended 06/30/2025. I would now like to turn the conference over to your host, Celine Oh, Head of Investor Relations for Franklin Resources. You may begin.

[Selene Oh, Chief Communications Officer & Head - IR at Franklin Resources]

Good morning, and thank you for joining us today to discuss your quarterly results. Statements made on this conference call regarding Franklin Resources Inc, which are not historical facts are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward looking statements involve a number of known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from any future results expressed or implied by such forward looking statements. These and other risks, uncertainties and other important factors are just described in more detail in Franklin's recent filings with the Securities and Exchange Commission, including in the risk factors and the MD and A sections of Franklin's most recent Form 10 k and 10 Q filings. Now I'd like to turn the call over to Jenny Johnson, our President and Chief Executive Officer.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

Thank you, Celine. Welcome, everyone, and thank you for joining us today as we review Franklin Pebbles' third fiscal quarter results. I'm here with Matt Nichols, our CFO and COO and Adam Spector, our head of global distribution. We'll answer your questions momentarily. But before we do that, I'd like to highlight some key developments and themes from the quarter.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

Over the past few years, Franklin Templeton continues to evolve into one of the world's largest and most diversified investment managers with a full spectrum of capabilities across public and private markets. At the core of this evolution is our commitment to being a trusted partner for what's ahead, helping clients navigate the complexity of global markets with confidence and experience. From individual investors and financial professionals to institutions, we are focused on delivering customized solutions to achieve their long term financial goals. We do this by leveraging the breadth and depth of our specialist investment teams who bring differentiated expertise. And we offer our strategies through a broad range of investment vehicles from mutual funds and ETFs to SMAs and private fund structures.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

As more asset owners seek multifaceted partnerships with fewer firms that can deliver across asset classes, styles and regions, we believe our business is well suited to meet that demand. In today's fast moving and interconnected investment landscape, Franklin Templeton's global reach is increasingly important. Our capabilities span US and international markets, including emerging markets, positioning us to meet evolving client needs as they allocate and reallocate across regions and through market cycles. Almost forty years ago, we opened our first office outside of North America in Taiwan, and we were one of the first global firms to build local asset management capabilities. We currently operate in over 30 countries, and our clients are located in over a 150 countries.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

Our goal is to manage each local business combined with global scale, focusing on local investing and client needs. And today, we have approximately 500,000,000,000 or roughly 30% of our AUM in countries outside The US. From our legacy as pioneers in international and income investing to leadership in emerging areas like AI, tokenization, and blockchain, we're committed to keeping our clients on the forefront of investment opportunity across markets and technologies globally. Innovation is and has always been central to who we are. Our investment teams around the world collaborate closely to provide forward looking insights and identify new opportunities.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

A great example of this is the Franklin Templeton Institute, which plays a central role in delivering timely research, thought leadership, and educational resources to help clients interpret and respond to fast moving market developments. Turning to public equity markets. It's been a tale of two quarters to start calendar twenty twenty five. Despite a turbulent April, global equity markets rebounded sharply from Liberation Day setbacks with the S and P five hundred posting one of its fastest ever postwar recovery, rising 25% from its April lows and ending the quarter up nearly 11%. The sharp recovery was led by large cap growth stocks, including most of the Magnificent Seven.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

The top performing sectors were IT, communication services, industrials, and consumer discretionary, along with the other major domestic indexes. The small cap Russell two thousand index rebounded in the second quarter, gaining 8.5%. International markets have shined so far in calendar 2025, but the outperformance versus The US was largely in Q1. Through June, the MSCI EAFE is up 19%, helped by a weaker US dollar and expectations that US tariffs will not meaningfully alter the corporate earnings outlook. Emerging markets similarly outperformed.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

After holding up much better in the first quarter of the calendar year, value stocks lagged growth in this quarter. Large cap growth outperformed large cap value by 14% in Q2. Our investment teams remain cautiously constructive on the outlook for The U. S. Equity market.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

While the market remains supported by solid fundamentals, caution stems from the market's already strong advance from its lows and ongoing geopolitical and policy uncertainty. Turning to public fixed income markets and rates. Following Liberation Day, the quarter opened with a higher than expected tariffs announcements, which sparked a temporary market sell off and a spike in volatility. Subsequent data, however, suggested that The US economy has remained resilient. Economic activity continued to unfold at a healthy pace even though volatility in exports and imports makes headline GDP numbers less informative than usual.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

The labor market remains at or close to full employment. And while tariff hikes have fed through into the prices of specific goods, they have not had a broader impact on inflation. All this seems consistent with the fact that exports and imports play a relatively smaller role in The US than in many other economies. Market conditions stabilized during the quarter as investors' worst fears proved unfounded, and risk assets recovered with global credit spreads spiking but then trending significantly lower. Lower rated sectors outperformed as did non US markets with the US dollar seeing its largest quarterly decline since 2022.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

The Fed has maintained interest rates unchanged at its May, June, and July meetings, noting that while there are some downside risks to growth, labor markets remain robust, inflation is still above target. We continue to expect at most one more rate cut by the Fed this year, with additional monetary easing possible should growth begin to deteriorate. Tariff driven price pressures and a still large fiscal deficit seem likely to exert some upward pressure on yields. Financial markets will likely continue to anticipate and push for more monetary easing than what we are forecasting, likely resulting in a prolonged roller coaster ride of market volatility. In private markets, quarterly volatility in global equity markets continued to act as a constraint on IPOs and M and A activity.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

As a result, continuation funds in secondary private equity were the primary sources for investor liquidity, where Lexington Partners provides scaled solutions, expertise, and leadership. The trends shaping the private equity landscape, growing net asset values, significant dry powder, longer holding periods, and shifting distribution patterns point to a secondary market opportunity that is poised to remain attractive for years to come. Private credit remained an area of conviction. Though even here, LPs are deploying more selectively. The macro backdrop characterized by higher base rates, modest spread widening, and potential credit deterioration has made quality underwriting and structure more important than ever.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

Increased market volatility, while challenging, also creates an attractive backdrop for our alternative credit businesses like direct lending, real estate credit, and special situations. In these markets where there is greater dispersion between the best and worst credits, Benefit Street Partners is well positioned given its conservative approach to underwriting and our deep portfolio management expertise. Real estate capital markets activity remains muted with greater volume in perceived stronger property types. Top performing property sectors include industrial, multifamily and self storage, which continue to have solid long term underlying property fundamentals. For the fourth quarter in a row, overall property indices showed modestly positive performance, signaling more evidence of reaching a bottom after two years of decline.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

As sentiment changes for real estate, Clarion continues to be well positioned with over 60% of AUM in the industrial and logistics sectors and less than 6% in the office sector. Our overall view of private markets remains constructive. While there may be subtle shifts within private markets, the changing trade policies and elevated geopolitical risks haven't altered our long term outlook. We continue to favor secondary private equity, real estate, and commercial real estate debt as key areas of opportunity. In today's environment of heightened volatility, shifting trade policies, and geopolitical uncertainty, diversification and active management are not just prudent but essential to mitigate potential risks and maximize returns.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

Diversification across various asset classes, regions and sectors can, of course, help cushion the impact of market volatility. And as a diversified active manager, we have the capabilities across public and private assets to customize solutions to help investors to achieve their long term financial goals. Turning now to our business results. Our third fiscal quarter saw progress across asset classes, investment vehicles and geographies, highlighting the strength of our diversified global platform. Our assets under management ended the quarter at 1,610,000,000,000.00 AUM increased from the prior quarter due to the impact of positive markets and strengthening flows, partially offset by long term outflows at Western Asset Management.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

Our institutional pipeline of won but unfunded mandates rose by net 4,000,000,000 to a record 24,400,000,000.0. It included 14,800,000,000.0 in new wins, reflecting strong client demand across all asset classes and was diversified across specialist investment managers in multiple regions. This quarter, we saw notable mandates in fixed income from our partners in the insurance sector. We remain encouraged by increased client engagement on potential opportunities ahead. Long term net outflows totaled $9,300,000,000 representing a marked improvement from the prior quarter's outflows of 26,200,000,000.0 Excluding Western Asset Management, long term net inflows were $7,800,000,000 this quarter and $7,400,000,000 in the prior quarter.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

This quarter represents the seventh consecutive quarter of positive net flows, excluding Western, demonstrating growing momentum across our business. Multi asset and alternatives continue to have strong, consistent performance and generated another quarter of positive net flows, resulting in a combined $4,300,000,000 for the quarter. Multi asset flows have been positive for 16 consecutive quarters. In addition, we saw improving flow trends in fixed income and equities. Equity net outflows were $645,000,000 as market volatility impacted growth strategies more than others.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

Given our diverse global equity capabilities, we benefited from the broadening of markets into both value and non U. S. Strategies, generating positive net flows into large cap value, international and emerging markets strategies. Putnam continues to be a strong contributor with positive net flows since acquisition across mutual funds, SMAs and ETFs. Fixed income net outflows improved to $13,000,000,000 this quarter.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

Excluding Western, fixed income net inflows were 3,500,000,000.0, driven by Franklin Templeton fixed income and Brandywine Global. Flight to safety generated positive flows into munis, stable value, and short duration strategies. Excluding Western, fixed income has generated positive net flows for six consecutive quarters. Western net outflows also moderated on a quarterly basis and are the lowest since the September 2024. In addition, money market balances have continued to grow as the Federal Reserve holds the target overnight rate at about 4%.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

We've had cash management net inflows for four out of the five last quarters, with $2,700,000,000 in each of the last two quarters, increasing our cash management AUM to 72,000,000,000 This quarter, we continued to successfully execute our long term corporate priorities, which reflect key areas of long term growth. Fundraising and alternatives generated $6,200,000,000 for the quarter, of which private markets assets totaled 5,300,000,000.0. This brings alternative asset fundraising to 19,000,000,000 fiscal year to date, including 15,700,000,000.0 in private markets, placing us at approximately the middle of our annual guidance range with one more quarter to go. Fundraising was diversified across alternative specialist investment managers and reflected client demand in secondary private equity, alternative credit, and real estate from institutions as well as from the wealth channel. In June, we announced an agreement to acquire a majority interest in Apira Asset Management, a pan European private credit firm with approximately $5,700,000,000 in AUM.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

The transaction will expand our direct lending capabilities across Europe's lower middle market and reflects our continued commitment to growing our global alternatives platform, which had $258,000,000,000 in AUM at quarter end. Appira is complementary to our existing global alternative credit offerings. Alongside Benefit Street Partners in The US and Alcentra in Europe, Appira further diversifies our firm's geographic exposure and capabilities within the private credit asset class. This acquisition brings our pro form a private credit AUM to nearly 90,000,000,000. On both a relative and absolute basis, Alternatives by Franklin Templeton, our alternatives business in the wealth management channel, has been a strong contributor over the course of this year.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

We have invested heavily in this business to meet the growing demand in this critical area. Over the past few years, we have focused on designing suitable products, investing in client education, and supporting wealth advisers. Our substantial distribution resources and coverage model includes a dedicated alternative specialist team that we have significantly expanded over the past two years. Our perpetual secondary private equity funds, Franklin Lexington private markets funds, are nearing 2,500,000,000 in gross sales fiscal year to date, and we are excited to expand into new markets in Europe and Asia, leveraging our global distribution footprint. Additionally, our two other primary alternative managers, Benefit Street Partners and Clarion Partners, each have perpetual funds with at least 1,000,000,000 in AUM.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

These are semi liquid perpetual vehicles and are open to ongoing subscriptions. Over the long term, we believe there is a significant opportunity for alternatives in wealth management, especially given the average wealth management client has approximately 5% or less of their portfolio allocated to alternatives. And depending on the client's liquidity needs, it could be much higher. Institutions, for example, have been allocating 30% or more. It is essential for us to provide opportunity for broader client participation in the investment returns generated in private markets.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

In addition, we're developing products with strategic partners in the retirement channel for private market investments to be included in defined contribution retirement plans. Client demand also continued across investment vehicles. Our ETF platform achieved its fifteenth consecutive quarter of positive net flows, attracting $4,300,000,000 and reached a new high of $44,100,000,000 in AUM, 19% growth from the prior quarter. We have over 13 ETFs with over $1,000,000,000 in AUM across equities and fixed income. And since acquisition, Putnam's ETF lineup has more than tripled in AUM, reflecting the strength of our global distribution platform.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

Retail SMAs had another quarter of positive net flows, and AUM is up 8% to $156,300,000,000 a new high watermark for our retail SMAs. Our leading SMA franchise saw continued progress driven by growth in Putnam, Franklin Templeton fixed income, Canvas, and Franklin Income. Canvas, our custom indexing platform, attracted notable inflows, with Canvas AUM of $13,700,000,000 increasing 20% from the prior quarter. The platform has been in positive inflows since acquisition. As I mentioned earlier, one of Franklin Templeton's strengths is our global presence in international markets are an integral part of our growth strategy.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

Our international business continues to expand with positive net flows for the quarter. Speaking of international markets, in May, I joined senior leaders in The Middle East to engage directly with government officials, policy leaders, and some of the region's most influential institutional investors. The visit reinforced Franklin Templeton's long term commitment to helping shape global capital markets in the region. This quarter, we worked with two of Saudi Arabia's leading institutions to invest in the country's financial markets, broadening investment offerings for both Saudi and international investors. We continue to be selected as a trusted partner to official institutions in emerging markets, including central banks and sovereign wealth funds.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

This quarter, we became the trustee and manager of the 1,700,000,000.0 national investment fund of the Republic of Uzbekistan. This strategic mandate builds on our fifteen year track record of managing mandates in frontier and emerging markets. We were also honored to be recognized as the asset manager of the year by the publication Central Banking, reflecting the progress we are making with this client base. This quarter, we launched an intraday yield feature on Benji, our tokenized money market fund, making investing faster, more transparent, and accessible twenty four seven. This is another example of how Franklin Templeton has always been at the forefront of change, whether it's providing investors with access to new investment opportunities, improving how they manage their money, or leveraging new technology to make it more efficient.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

Before I turn to investment performance, I wanted to provide a brief update on July flows. While it's early and we will formally report preliminary July AUM and flows next week, Western's long term net outflows are expected to be approximately $3,000,000,000 for the month of July and had ending AUM of approximately $236,000,000,000 Excluding Western, we expect long term net inflows of approximately $3,000,000,000 Now in terms of investment performance, over half of our mutual fund AUM is outperforming its peer median across the three, five, and ten year periods. The one year would also be in the top half, excluding one of our largest funds managed for yield. Similarly, over half of the strategy composite AUM is outperforming its benchmarks over the same time periods. Compared to the prior quarter, mutual fund investment performance increased in the three, five year and ten year periods and declined in the one year period, again, primarily due to the categorization of one of our largest funds managed for yield.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

Turning briefly to financial results. Adjusted operating income was $378,000,000 flat from the prior quarter, driven by lower compensation expenses, offset by the impact of Western outflows and lower average AUM. We continue to focus on expense discipline and operational efficiencies. Our balance sheet remains strong, providing flexibility to pursue strategic investments and return capital to shareholders. Finally, at Franklin Templeton, our collective purpose is clear, to help our clients all over the world achieve the most important financial milestones of their lives.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

Central to our approach is a deep understanding of each client's goals, allowing us to serve as a trusted partner through the complexities of the financial markets. We have built a resilient business that is diversified across investment teams, asset classes, vehicles, and regions, delivering value to all stakeholders. I'd like to express my thanks to our talented and dedicated employees around the world whose client first mindset drives our continued success. Now let's open the call up to your questions. Operator?

[Operator]

Thank you. If you would like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate that your line is in the question queue. If anyone should require operator assistance during the conference, Our first question comes from Glenn Schorr with Evercore. Please proceed with your question.

[Glenn Schorr, Senior MD & Senior Research Analyst at Evercore]

Hi. Thanks very much. So once off, I guess, private credit in in general, I I like what you've done with Apera, and it and it seems like dedicated for European direct lending. The bigger picture question is how do you integrate how do you grow organically, and then how do you integrate something like Apara into the broader private credit platform? And and can these products and strategies stand alone, or do you need to have that fully integrated across all asset classes solution throughout credit credit?

[Glenn Schorr, Senior MD & Senior Research Analyst at Evercore]

I'm just trying to think about where you're building towards. Thanks so much.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

Yeah. Thanks, Glenn. You know, mean, first of all, remember that we also acquired Alcentra, and I think that has gone very well. It reports up under BSP reporting into David Manlow. And, you know, they're big CLO managers.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

It's really, grown our CLO capabilities. You know, don't we don't wanna be viewed as an asset manager that just acquires and has these things stand alone. If you look at what we think are real growth story and opportunity, it's the integration of these things. And so there'll be parts of of Appira that'll be stand alone. They have a they just raised a a $2,900,000,000 fund.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

But they will also, through sourcing, you know, leverage the broader part of the organization, leverage it for distribution. And and so, you know, we're we really are looking when we close Appira as a single $900,000,000,000 private credit manager as opposed to, you know, BSP, Alcentra, and and Appira. You know, and they've got broad capabilities. And and, honestly, what's happening in private credit is sort of your, you know, more core type private credits becoming a little bit more commoditized. And so having that expertise in, say, like, middle market direct lending, which Appira is, or asset backed, or real estate debt, those are really, really important.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

And you wanna be able to globalize that kind of expertise. But to the answer is we really think of it as one private credit group.

[Glenn Schorr, Senior MD & Senior Research Analyst at Evercore]

Okay. Thanks, Jenny.

[Operator]

Our next question comes from Bill Katz with TD Cowen. Please proceed with your question.

[William Katz, Senior Equity Analyst at TD Cowen]

Great. Thank you very much. Maybe a sort big picture question for you. I think you've been at the sort of the vanguard of tokenization. I'm sort of curious to think beyond maybe just the short termism of whether or it helps a specific asset class.

[William Katz, Senior Equity Analyst at TD Cowen]

How do you see this shifting the potential economic value proposition with the distribution partners? Thank you.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

Let let me let me answer that in a you know, we think that it'll fundamentally change the rails of the financial system. So why do we think that? Let me let me just use our tokenized money market fund as an example. So, you know, we launched this in 2021. We are still the only asset manager in the world who provides digitally native exposure on chain as opposed to shadowing, onto you know, from your old system shadowing onto the blockchain.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

That gives us a lot of additional capability, that that enhances what we can do for clients with that single product. So I'm gonna I'm gonna start kinda small and then go broader. So, you know, we just launched intraday yield. If you hold our Benjie money market fund, you will see what you earned that day, and it'll be posted to your account that same day. If you use us as if you use the Benji product as collateral and you only hold it for four hours and thirty two minutes, you're gonna get four hours and thirty two minutes of yield.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

So it's really because blockchain is so efficient that it enables those enhanced services. When we say and and and when the SEC approved that product, they had us run and you we were still running the transfer agency in house. They had us run it parallel process, and we were astonished even by the difference in cost to actually run transactions on chain versus on the old transfer agency system. And so if you take that more broadly, there's gonna be tremendous amount of opportunities. Well, what does blockchain do?

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

Does three things. It has a source of truth of ownership. It has the ability to execute smart contracts, and it has, has a payment mechanism. So why is that important? If you think about the players in the financial system, there's all these toll takers that serve in those roles.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

So for example, a a bank may stand between Franklin and a counterparty on an FX contract because we don't want to worry who the counterparty is, and we need to make sure we get paid. But with blockchain, because the smart contract can execute it and because the entitlement of ownership is embedded in the token and there's a payment mechanism, we can be assured assured that we will get paid and that the counterparty will pay. And so you you actually are going to, disintermediate a lot of the toll takers on transactions, and that's gonna open up, you know, opportunities and drive down costs of delivering. And that's why I say I think that ultimately, you know, mutual funds and ETFs will be leveraging blockchain because it's just a less expensive way to do it. Now you hear things like, hey.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

It's a great way to democratize alternatives. The reality is the technology exists today, but you still need market makers and others to be able to step in and, you know, allow the maturity of that. So it's not the technology that's holding us back. It's just that the infrastructure has been slow. And it and it will be you know, it'll take some time to roll those things out.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

But I always say you can't you can't stop, water from rolling down the mountain. You could try to block it, but it get it finds its way down. The fundamental nature of blockchain is such that it will replace a lot of the existing rails, and it will create opportunities for innovation.

[William Katz, Senior Equity Analyst at TD Cowen]

Alright. Thank you. Just another follow-up. Yeah.

[William Katz, Senior Equity Analyst at TD Cowen]

It's great. That's great. Lot lot to think about with all this going on. Just stepping back now, I'm really encouraged to see the buyback step up a little bit this quarter. One of the pushbacks we're getting on the story is sort of some uncertainty around where you might stand in the conversation with the regulators on any potential financial settlement, with WAMKO.

[William Katz, Senior Equity Analyst at TD Cowen]

It's certainly great to see clients stabilizing on the attrition side. How do we think about the where you might be sitting in terms of those conversation with the regulators? How you might reserve, if at all, for potential charge? And then how are you thinking about capital deployment on the other side of that? Thank you.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

So I'll I'll start, and then, Matt can can, jump in on anything I don't cover. Look. First of I wanna reiterate the strength of our fixed income franchise. You know, we we the the, the Franklin fixed income is probably the largest SIM in our institutional one, but unfunded unfunded pipeline. And that would have been unheard of five years ago.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

They just didn't have the institutional capabilities. We've been in positive flows with the Franklin fixed income and Brandywine for multiple quarters now. So they've really been able to pick up a lot of the the slack there from Western. And and and so that's, you know, obviously, really important. Western has is also still in positive, gross sales.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

So they have and their gross sales have actually increased. And their performance and that's been something we've said all along that's been really important to us to try to insulate the investment team as much as we can from the distraction of everything going on to ensure they can focus on clients. And their one, three, and five year numbers, you know, are be they're in the, like, the ninetieth close to the ninetieth or around the ninetieth percentile for one, three, and five years beating the, composite benchmark. So, you know, their performance is really good. And then you you know, we've gone from what was 37,000,000,000 in outflows net outflows, I think, in December to, June was, I think, 4,100,000,000.0, and July is 3,000,000,000.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

So, you know, the story, there is is improving, and there's some amount of stabilization on some of that. But the, you know, the reality is with the government, you know, we don't control the pace of that. And so, you know, we are obviously continuing to cooperate with the the government. As a reminder, you know, Western's about just under 6% of our revenues. And, you know, today, we have well, I'll let I'll let Matt address anything on on reserves, or anything else you wanna add to that.

[Matthew Nicholls, Executive VP, CFO & COO at Franklin Resources]

No. I maybe I'll just say, you know, there's nothing to report on reserves at this time. And then to answer Bill's other question about capital management priorities in the context of this situation and just in general, I'll just reiterate, Bill, obviously, you're very familiar with this. Our priorities are, you know, obviously, the dividend, organic growth strategies. We've Jenny's talked a lot about the, the various areas that are growing, you know, alternative assets, ETFs, Canvas, multi asset solutions.

[Matthew Nicholls, Executive VP, CFO & COO at Franklin Resources]

We've invested very heavily in each of those areas, and they're the areas that are growing. We're focused on repurchasing employee share grants. As you just noted, that's what we managed to do some of that in last quarter. We've also been servicing our debt. We delevered by another 100,000,000 in the quarter.

[Matthew Nicholls, Executive VP, CFO & COO at Franklin Resources]

We also made the last acquisition related payment of $100,000,000 in relate related to, the Lexington acquisition. We're we're being conservative about around debt, just in case we wanna pay down the $450,000,000 of debt that comes due next year, but, you know, we're we're probably more likely than not accessing the, the debt capital markets between now now and and then assuming the markets are in are in good shape. And then, of course, we look at opportunistic share repurchases and acquisitions. The the market is very, very active as we've as we've talked openly about.

[Operator]

Our next question comes from Alex Blostein with Goldman Sachs. Please proceed with your question.

[Alex Blostein, Managing Director at Goldman Sachs]

Great. Thanks. Good morning, Jenny. Hey, Matt. Wanted to get your guys' thoughts on the outlook for private markets growth for Franklin over the next twelve months.

[Alex Blostein, Managing Director at Goldman Sachs]

And a bit of a two parter, but I guess, one, was hoping to get a more wholesome update, I guess, on the wealth channel. Nice traction with flex products, both US and non US. I think you guys have BSP as well with a with a real estate debt fund as well. But talk to us a little bit about how that's tracking, where do you see that going, and what else you're planning on launching, that could be needle moving there over the next kinda twelve months. And then similarly, maybe just update us on the institutional outlook, with the Lexington, flagship fund coming up here in the next few months.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

Sure. So, you know, we said at the beginning of the year, that we thought that our alts fundraising would, you know, be in the range of 13 to 20,000,000,000, and the higher end of that range would be dependent on a first close of a Lex flagship fund 11, if it happened in this in in September. So that isn't gonna happen. That that they are they are just now, kicking off in the market, and so there probably won't be a first close until either December or early twenty twenty six. But we're sitting here today after three quarters at halfway right in the middle of that range at 15,700,000,000.0.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

We think we'll end the year around 18 and a half. Of that, so far, the 15.7, 25% has been raised in the wealth channel. And, you know, if you if you look at our current assets, it's about 10% of the assets are in the wealth channel. So that's a really good sign. Now we went out with a limited number of distributors when we first launched Flex.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

I think we've added something like 16 now internationally. We're the the the Flex and the Flex International, we're seeing about a 150 to 200,000,000 a month coming in in that particular perpetual product. And, we're continuing to add distributors. So there's a lot of opportunity as far as additional distributors to increase that, that number. You know, we we also launched a perpetual real estate debt fund with BSP.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

That one is really just with one wirehouse in The US, and it's, you know, it's got some traction. We actually have seen a lot of good momentum in July on that, but we are launching internationally with a, you know launching with a global distributor, that we think will also help that one, take up. But today, you know, we've got three perpetual products for real estate, real estate, private credit, and, secondary PE that are billion dollars each. So we've got scale. We've got track record there.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

And so as the world and I think I think the thing that is often lost on people as far as Alts in the wealth channel is that there's a view that if you have a good product, that's gonna be all you need. The reality is that's that's just, you know, table stakes. It's the ability once you get on you have to get obviously on the platform, but it's the education and it's the relationships with the financial advisers that's so significant. And where we think we stand out is, you know, the wealth channel is in our DNA. We have relationships with all these advisers, and we have the Franklin Templeton Academy that can help in the education process.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

I can't remember, Adam, when we first launched you know, when we when we raised, 20% of Lexington Fund ten, with with one of our wirehouse, I think it was something like 44% of advisers had never sold an Alt product before. And it is that that blocking and tackling of, you know, being able to do the education that's so important. It took us a few years, honestly, to figure this out. We think we've we actually are now demonstrating that we have figured it out, and we also have the the luxury of the fact that we, you know, we sell to a 100% of a financial adviser's book. So we can cover with wholesalers or market leaders out there in a way that it is difficult for the the alt managers who are now selling to what is 5% and hopes to be 10% of the book.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

And so we have 90 people who are just dedicated to supporting our market leaders who are out there talking to advisers with specialty expertise on how to think about alternatives in the wealth channel. So we continue to be really optimistic. We said we think, you know, over time that should get the wealth channel should represent certainly 20% of our AUM, potentially even over time to 30%.

[Matthew Nicholls, Executive VP, CFO & COO at Franklin Resources]

And and, Jenny, on top of that, as we've invested in headcount, both in Europe and Asia, most recently, we're adding headcount to the 90 that, Jenny mentioned with the specialists.

[Alex Blostein, Managing Director at Goldman Sachs]

Great. Thanks for that. And and then, Matt, I was hoping you can, update us also on the expense guidance, just as you kinda progress here towards the end of the fiscal year and any early thoughts for fiscal twenty twenty six for you guys.

[Matthew Nicholls, Executive VP, CFO & COO at Franklin Resources]

Sure. Thanks, Alex. I'll I'll go through the fiscal fourth quarter and annual guide. Before I do that, though, I just wanna reiterate, Jenny's point on July monthly AUM as she had in her prepared remarks. It's early, as Jenny mentioned, particularly given the fact that it was month end just yesterday, where formally announced the preliminary July AUM inflows next week.

[Matthew Nicholls, Executive VP, CFO & COO at Franklin Resources]

But we expect Western Asset long term net outflows to be approximately 3,000,000,000 for the month of July and an EAUM for Western Asset to be approximately $236,000,000,000 Excluding Western Asset, we expect long term net inflows of approximately $3,000,000,000 for the month. So combined, we expect to be slightly flat to slightly positive, let's say, the for the month inclusive of of Western Asset or or 3,000,000,000 positive excluding Western Asset. In terms of the quarter, the effective fee rate, for the quarter for next quarter until about fourth quarter guidance now, we expect to be in the high 30 sevens. To be clear, the reason why our effective fee rate was about fifth point five, lower than, we where we guided about 80% of that difference was attributed to the calculation of EFR, which was basically the daily average AUMs 1% lower than the simple monthly average AUM. So that impacted our EFR by about point four, basis points, and that explains the difference between the guide that we gave versus, where we came out.

[Matthew Nicholls, Executive VP, CFO & COO at Franklin Resources]

We expect that to snap back into the high 30 sevens, again, in the fourth fourth quarter. The, comp of benefits, expect to be 860 to 870,000,000. That assumes though about $100,000,000 of performance fees. This is elevated versus our usual guide of 50,000,000. We expect an elevated performance fee quarter of of, of around a $100,000,000.

[Matthew Nicholls, Executive VP, CFO & COO at Franklin Resources]

Please note though that the payout ratio on that would be 60% versus the usual 55% due to the nature of part of that performance fee. But, again, it's a 100,000,000 guys versus our usual, 50,000,000. This also the $8.60 to $8.70 also includes slightly higher incentives due to better performance and, higher AUM. IS and T, we expect to be about a 155,000,000. This includes just a couple of million dollars higher on our investment management platform fee integration on the Aladdin project, but that's just because we're ahead of schedule.

[Matthew Nicholls, Executive VP, CFO & COO at Franklin Resources]

It's it's nothing to do with, any changes in terms of where where we expect that to come out in terms of expenses. A 155,000,000 for IS and T. Occupancy, we expect to be roughly flat, 69 to 70,000,000, for the fourth quarter. G and A, we expect to be, slightly, higher, a 190 to a 195. This is because of higher professional fees.

[Matthew Nicholls, Executive VP, CFO & COO at Franklin Resources]

So overall, we expect the quarter to end up being about 1.285, 1.283 to 1.285, in terms of adjusted, expenses. Taxes, we expect to be on the higher end of our 25 to 27% range for the quarter because of expected discrete tax items in the quarter. But for the year, we expect it to to come into the to the middle of that range. In terms of fiscal twenty five, for the full year '25, as you can see, we can add the the quarter guidance to the other quarters. And you'll see that adjusting for the additional quarter of Putnam and excluding performance fee compensation, we expect expenses to still be roughly flat to $20.24, perhaps 20,000,000 to $30,000,000 higher, so a little bit little bit higher.

[Matthew Nicholls, Executive VP, CFO & COO at Franklin Resources]

This is notwithstanding markets being significantly higher since I last gave this guidance, in the last quarter. Importantly, this includes all the strategic investments that we've been talking about. We've managed to find other ways internally to fund these, via other cost saves in the business. And as I mentioned a moment ago, in each area, in each of the areas that we've invested in, we're seeing meaningful growth now both in Alt, CTS, Canvas, Multi Asset Solutions in particular. Alex, in terms of your question on fiscal twenty six, you know, as referenced, and obviously, we're very early in this, but as referenced in the past couple of quarters, we've, got expense initiatives underway, and Jenny referenced these at the beginning, that are expected to position us to enter fiscal twenty twenty six with at least $200,000,000 of run rate cost savings relative to fiscal twenty five, excluding performance fee compensation.

[Matthew Nicholls, Executive VP, CFO & COO at Franklin Resources]

The only offsets to these savings, which could be a little bit uneven during the fiscal year, will be driven by higher growth areas such as distribution expenses in connection with potential faster growth, if that indeed happens, in alternative asset management and faster growth, in in AUM in addition to the, to the Appira acquisition. The Appira acquisition adds about $30,000,000 of expenses. And, of course, if we are if we have higher distribution related expenses related to faster growth in alternative assets, as an example, we will make sure that we call that out as we go through, our expenses so you can keep track of the of the expense saves that we've referenced, on this call and and previous quarters.

[Alex Blostein, Managing Director at Goldman Sachs]

That's great. Super comprehensive as always. Thank you, guys.

[Matthew Nicholls, Executive VP, CFO & COO at Franklin Resources]

Thanks, Alex.

[Operator]

Our next question comes from Dan Fannon with Jefferies. Please proceed with your question.

[Dan Fannon, MD - Research Analyst at Jefferies & Company Inc]

Great. Thanks. Apologize just to clarify, Matt, what you just kinda went through. So for fiscal twenty six, I understand you have $200,000,000 of savings going into the year, but did you give a number for fiscal twenty six expenses?

[Matthew Nicholls, Executive VP, CFO & COO at Franklin Resources]

We didn't give a a notional number, but you can basically, if if you take, fiscal twenty five guidance that I just gave and you could take 200,000,000 off that. That's that's where we'd expect to be except for the information I just provided on a peer. And if we grow faster in alternative asset management in particular because the placement fees and distribution expenses can can add up, in the short term, which will, of course, be offset by higher revenues in the longer term. And we'll we'll obviously, highlight those if and when they happen.

[Dan Fannon, MD - Research Analyst at Jefferies & Company Inc]

Understood. And that includes, that's assuming flat AUM from now and no performance fees. Is that correct? Right?

[Matthew Nicholls, Executive VP, CFO & COO at Franklin Resources]

Yeah. Yeah. It excludes performance fees from from both from both sides. So it excludes performance fees from, you know, 2025, and and and it excludes it from the '26 sort of, you know, summary that we gave.

[Dan Fannon, MD - Research Analyst at Jefferies & Company Inc]

Great. Okay. Thank you for clarifying that. And then just on the fee rates, and understand there were a lot of moving parts in terms of this quarter. But if I look just over the last year and your asset mix, you have equities up substantially in terms of its AUM, fixed income down.

[Dan Fannon, MD - Research Analyst at Jefferies & Company Inc]

So that mix shift is more positive, but your fee rate is essentially flat year over year. So can you talk about obviously, alternative is also a source of growth, but that AUM in general is flat. So as we think about the underlying trends beyond that, like, are there other things that are putting pressure on the fee rate that would otherwise make it so that number isn't higher as the mix continues to move towards higher fee assets? Because I'm just surprised in aggregate if you were to tell me AUMix today versus where it was a year ago that the fee rate isn't higher.

[Matthew Nicholls, Executive VP, CFO & COO at Franklin Resources]

Yeah. I mean, it it's it's just really interesting question because when we when we look at our fee rate just being stable, because if if you if you exclude some of the episodic events that create upside to the EFR during various quarters, like, for example, if we have catch up fees related to a Lexington fund, that that that can spike the EFR up to, you know, 39 basis points, something like that, or or even higher that happened in different quarters. If if if you if you if you take that out of the equation and you normalize it over a period of time, we've been relatively stable. The reason why we're stable is because we've had offsets to the to the lower fee businesses or where we've had to lower fees to be competitive in certain in particular, certain large institutional, opportunities for the for the firm. So we we often think to ourselves that it's a it's a fairly reasonably decent position to be in to keep it relatively stable versus versus it going down.

[Matthew Nicholls, Executive VP, CFO & COO at Franklin Resources]

The the product product mix, if you will, quarter over quarter, for example, in in, in this this quarter that we're reporting now, only about 20% or 25% of the the fee difference is is attributed to the to the product mix. But but but we'll say the same thing. You know, we've had higher growth areas across Canvas, ETFs, some of the large larger institutional mandates that have lower fees. That's where we've been growing. To offset the pressure on those lower fees, we've had inflows into alternative assets.

[Matthew Nicholls, Executive VP, CFO & COO at Franklin Resources]

But then on the alternative asset side, we've had higher distributions and realizations that have offset some of that. But gradually, you know, we're we're seeing some more momentum across all the areas that Jenny referenced in her remarks that are certainly seeing a tick up in AUM on the alternative asset side. But when we look at the overall picture, we see a situation where we just have relative stability in it in EFR versus any big, you know, increases or or any certainly, any any pressure on the on the downside. And and we do our best, obviously, to give you the breakdown and be as transparent as we can as we go through quarter quarter over quarter. This this quarter, by the way, another point to mention is that, you know, something like point two of the difference was just the the the weakening dollar, you know, that, so it was an FX related matter.

[Matthew Nicholls, Executive VP, CFO & COO at Franklin Resources]

It's not even anything to do with with the, with the fundamental product shift or fee pressures or anything like that. It's just it's just FX.

[Dan Fannon, MD - Research Analyst at Jefferies & Company Inc]

Understood. Thank you. Thank you.

[Matthew Nicholls, Executive VP, CFO & COO at Franklin Resources]

Sure.

[Operator]

Our next question comes from Ken Worthington Worthington, JPMorgan Chase and Co. Please proceed with your question.

[Kenneth Worthington, Equity Analyst at JP Morgan Chase & Co]

Hi. Good morning. Jenny, I wanted to dig deeper, maybe follow-up on Bill's question earlier on digital blockchain technology, you know, really permeating the traditional asset management business. So you were early. You were innovative.

[Kenneth Worthington, Equity Analyst at JP Morgan Chase & Co]

You're a leader, but it doesn't always seem to translate into obvious economic success. And I recognize it's early, but if we step back and look forward, where do you see the likely opportunities for Franklin to translate, your early insights and investments in digital blockchain technology into economic success that maybe we as outsiders can see?

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

Yeah. So, you know, we built an ecosystem in there. As I mentioned on the Benji, you know, platform, we actually got a patent on our wallet. Right now, you you download it from the Apple Store, but we're we really have designed it because we think it could be white labeled by others. And right now, that wallet can as well and the Benji app or the the Benji token, it can operate actually across chain on eight different blockchains.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

So, you know, as the traditional distributors start to think about how they have to deal with the crypto world and the tokenization world. They're gonna look for partners, we think, that will help them to navigate it, and we've built this infrastructure to do it. So that's that's how we're thinking about translate. Now today, you know, we actually manage reserves for four stablecoin providers. You know, everybody's aware of Circle and USDC because it's the big elephant in the room, but there's actually other ones.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

We were just selected by the the the first state who is issuing their own stablecoin to manage that stablecoin. So, you know, today, there's been kind of a parallel world between the crypto world and the the the traditional finance world. And now as you get clarity around regulation like the Genius Act, you're starting to see firms be more comfortable being able to dip their toe into it. And that's where we think we can be a really important partner because, again, this the the infrastructure that we've built, we've been building since, I think, 02/2018. It is it it it's not gonna be an easy one for people to catch up quickly.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

And so our ability to to really private label that and have it integrated in others, you know, in their client platforms. Just imagine if you're a distributor, you know, you've got your clients who are holding their crypto assets. Some portion of them, probably the younger ones, are holding their assets over at Coinbase. Wouldn't you like to be able to move that over into a wall that's integrated on your system so you can provide an entire view of the client's investment opportunities? And that's the kind of infrastructure that we've built.

[Kenneth Worthington, Equity Analyst at JP Morgan Chase & Co]

Great. And and maybe just to follow-up there because it's pretty interesting. Any any conversations with these other companies to white label, you know, your technology and what you're doing, or is it just basically the Genius Act and some of the other regulation is is so real time that that we haven't gotten there yet?

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

We are having conversations. A lot of the early conversations actually were on the international side and have been on the international side partly because they had more clarity on regulation. But now with the Genius Act, we're actually having, conversations with distributors in The US as well.

[Kenneth Worthington, Equity Analyst at JP Morgan Chase & Co]

Got it. Makes sense. Thank you so much.

[Operator]

Our next question comes from Brian Bedell with Deutsche Bank. Please proceed with your question.

[Brian Bedell, Director at Deutsche Bank Securities]

Great. Thanks for taking my question. Most have been asked and answered. And thanks for all the commentary on the tokenization, Jenny. It was really, really good color.

[Brian Bedell, Director at Deutsche Bank Securities]

Maybe switching topics to the four zero one k theme and the private markets in four zero one k theme. You know, obviously, you guys have a, you know, really well rounded private lineup. What is your, I guess, desire or, you know, your plans to potentially integrate private and public products? You could you could most likely do this yourself. And and then, you know, go after the four zero one k mark.

[Brian Bedell, Director at Deutsche Bank Securities]

And if you could just remind us again your presence and defined contribution, and and in target date products. And how do you see that, or do you think you need to partner?

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

Yeah. So so today, we have about 428,000,000,000 in retirement. About 120,000,000,000 of that is in defined contribution. You know, if if as a reminder, just when the acquisition of Putnam gave us much more scale in target date, and stable stable value, so that's enabling us to be, a bigger player there. We have we launched a partnership.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

So to answer your question about partnership versus doing it our own, we're open to both. Like, we wanna do both. And so we actually, last year, did a partnership with Apollo and launched a you know, we were handling the real estate portion. I think they're doing the private credit on a platform. Look.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

It's gotten traction with some of the smaller plans, but the reality, the DC space is an incredibly litigious space. And in the absence of clarity around legislation, you're probably gonna be it's gonna be a slower uptake. Having said that, you know, we announced Empower is very focused on this. They're doing a, you know, adviser managed account solutions through Morningstar, and we're we're a participant in, in that program. So they know that there's opportunity.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

And just to put this in scale, like DB plans, half of the assets that we have about a 160,000,000,000 in defined benefit, half of that's in alternatives. So it's a real missed opportunity, but, unfortunately, the DC space of probably all areas of asset management is the most litigious when it comes to fees. And so it makes the fiduciaries really hesitate until they get, like, a DOL safe harbor or something. So good opportunity, but there is just the kind of the the realities of it. I think it's gonna be slower uptake.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

But we're really well positioned. They're actually already there, and we will have, our target dates will have, private markets. We're building those models now, probably by the 2026, we will launch those. And it's just a matter of what's the uptake. I don't know, Adam. Is there is there anything else? Sorry.

[Adam Spector, EVP & Head of Global Distribution at Franklin Resources]

Yeah. I mean, just to put a little context on that, the the the target date fund is now, about $19,000,000,000, so it's pretty substantial. A lot of that came through the Putnam acquisition, and we think that's really important because, you know, a third of DCAUM is going into the QDIA space or QDIA, and and having that target date has really helped us there. We've got about $2,000,000,000 now, in the sales pipeline, that we think will close shortly, in that space. Mike, I'm talking there about the sales pipeline, not our institutional one but unfunded pipeline, but that's up quite substantially, as well, to about $24,000,000,000, which is a $4,000,000,000 increase quarter over quarter.

[Adam Spector, EVP & Head of Global Distribution at Franklin Resources]

So strong growth, on that institutional side, but core sales is also accelerating quite nicely, up about 22%, over the, average of the last eight quarters, and up 10%, over the same, period year to date last year. So strong growth both in the core market, of course, where the DC retirement, would fall as well as in the institutional markets.

[Operator]

Our next question comes from Michael Cyprys with Morgan Stanley. Please proceed with your question.

[Michael Cyprys, Managing Director at Morgan Stanley]

Great. Thank you. Good morning. Just a question on non US allocations just given the shifting trade policy, geopolitical uncertainty, and heightened volatility. Just curious what you're seeing from your US clients and non US clients in terms of potential and evolving interest for non US strategies and scope for potentially shifting allocations away from The US.

[Michael Cyprys, Managing Director at Morgan Stanley]

Curious what you're hearing, to what extent do you think this might play out, and maybe you could speak to some of your non US strategies that might be best placed to capture what could be potentially money in motion.

[Adam Spector, EVP & Head of Global Distribution at Franklin Resources]

I'll take that.

[Adam Spector, EVP & Head of Global Distribution at Franklin Resources]

You know, we have absolutely seen that, over the last quarter, but I wanna distinguish, between what was driving those changes. From a client perspective, we don't see that as kind of a political statement, but rather, an investment opportunity statement as there just seems to be growing interest and growing upside, in markets outside of The US. So particularly, we've seen growth in our emerging markets equity strategies, international and global equity, as well as value as opposed to growth as people tend to, in times like this, like to rebalance their portfolios, and a lot of people are over allocated in large cap growth. On the fixed income side, what we've seen is movements into areas like, short term, of course, but also global bond, EM, high yield, and some multi sector products as well. In the in The US, there was a general flow out of equities, for both us and the industry.

[Adam Spector, EVP & Head of Global Distribution at Franklin Resources]

But outside of The US, there is an attractiveness to equity, especially in domestic markets in Europe and Asia. They're seeing more upside in their markets domestically versus The US, especially if there's gonna be a weaker dollar, which I think is a call many are making. So we're seeing a lot of growth in non US equity and fixed income in both niche and kind of more broad global products.

[Operator]

This concludes today's question and answer session. I would now like to hand the call back over to Jenny Johnson, Franklin's President and CEO, for final comments.

[Jennifer Johnson, President, CEO & Director at Franklin Resources]

Okay. Well, thank you, everybody, for joining us today. You know? And once again, we're we're a people business, and I wanna thank our employees for their continued hard work and dedication. And we look forward to speaking with you again next quarter. Thanks, everybody. Enjoy the rest of your summer.

[Operator]

Thank you. This concludes today's conference call. You may now disconnect.

Participants

Executives

• Selene Oh, Chief Communications Officer & Head - IR
• Jennifer Johnson, President, CEO & Director
• Matthew Nicholls, Executive VP, CFO & COO
• Adam Spector, EVP & Head of Global Distribution

Analysts

• Glenn Schorr, Senior MD & Senior Research Analyst at Evercore
• William Katz, Senior Equity Analyst at TD Cowen
• Alex Blostein, Managing Director at Goldman Sachs
• Dan Fannon, MD - Research Analyst at Jefferies & Company Inc
• Kenneth Worthington, Equity Analyst at JP Morgan Chase & Co
• Brian Bedell, Director at Deutsche Bank Securities
• Michael Cyprys, Managing Director at Morgan Stanley