Franklin Resources Q2 Earnings Call Highlights

Key Points

• Franklin reported an “excellent quarter” with $16.9 billion of long‑term net inflows, cumulative long‑term inflows of $118 billion (up 28% Q/Q and 38% Y/Y), total AUM of $1.68 trillion, and a $20.2 billion institutional pipeline of won but unfunded mandates.
• Alternatives remain a key growth engine: the firm has $283 billion in alternative AUM, recorded $14.3 billion of alternatives fundraising (including $13.2 billion in private markets) and fiscal YTD private fundraising of $22.7 billion, positioning it to exceed its $25–30 billion annual target; Lexington secondaries were material to flows and secondaries markups were described as ~20–25% of total return.
• Personalization and product expansion drove retail momentum—ETF AUM hit $61.6 billion (up 67% Y/Y) with $4.5 billion inflows, Canvas custom indexing reached $22.9 billion with $5.3 billion inflows, and SMAs stood at $168.3 billion—while the firm is investing in AI (a Microsoft‑linked “Intelligence Hub”) and pursuing digital‑asset initiatives including acquiring 250 Digital and launching “Franklin Crypto.”

Franklin Resources NYSE: BEN executives highlighted broad-based organic growth and continued progress on key strategic initiatives during the company’s earnings call for the quarter ended March 31, 2026, pointing to strong long-term inflows across public and private markets, rising ETF and customization-platform assets, and expanding alternatives fundraising.

Quarterly flows led by alternatives, multi-asset, ETFs, and customization

Chief Executive Officer Jenny Johnson described the period as “an excellent quarter,” reporting $16.9 billion in long-term net inflows and record gross sales. Johnson said the firm generated positive long-term net flows in every region and that each of its “key growth drivers”—private markets, retail separately managed accounts (SMAs), the Canvas customization platform, ETFs, and solutions—“contributed meaningfully” to results.

Johnson said the firm’s long-term inflows totaled $118 billion for the period referenced on the call, up 28% quarter-over-quarter and 38% year-over-year, excluding reinvested distributions. She also cited a $20.2 billion institutional pipeline of won but unfunded mandates, which she said was consistent with the prior quarter.

Total assets under management were reported at $1.68 trillion, which Johnson said remained diversified across asset classes, client segments, regions, and investment groups.

Public markets: multi-asset strength offset by equity and fixed income outflows

In public markets, Johnson said multi-asset AUM stood at $207 billion and generated $9.5 billion in positive net flows, marking what she called the 19th consecutive quarter of positive flows for that asset class.

Equities posted $4.7 billion of net outflows, though Johnson said the company saw positive net flows in large-cap value, core systematic and single-country ETFs, infrastructure, and sector strategies. Fixed income had net outflows of approximately $300 million for the quarter, but Johnson said that excluding Western, fixed income flows were positive $3.6 billion, a ninth consecutive quarter of positive long-term net flows, with momentum in multi-sector munis, stable value, and global fixed income strategies.

Alternatives fundraising and Lexington secondaries in focus

Johnson emphasized Franklin Templeton’s alternatives platform, reporting $283 billion in alternative AUM and $14.3 billion in alternatives fundraising during the quarter, including $13.2 billion in private markets assets. She said the private markets fundraising was diversified across alternative credit, secondary private equity, real estate, and venture credits.

Johnson said fiscal year-to-date private markets fundraising reached $22.7 billion, “already in line with full year 2025 levels,” and stated the firm was positioned to exceed its $25 billion–$30 billion annual fundraising target, which she said had been adjusted upward at the start of the fiscal year.

On analyst questions about Lexington Partners, Johnson said Lexington was “meaningful” to the quarter’s fundraising but added she could not provide details on the flagship fund at this time. “You’ll get a specific update on Lexington’s flagship fund when they…do a filing,” she said, suggesting timing “towards the end of 2026,” later clarified as potentially around Franklin Templeton’s fiscal year-end in September, with a possible update earlier.

When asked about recent scrutiny around secondaries valuations, Johnson said that in secondaries, the “discount markup is about 20%–25% of total return over the life of a fund,” adding that “most of the appreciation really comes in the asset itself.”

Executive commentary also touched on private credit positioning. Johnson said the quarter’s largest contributor was private credit managers, and noted fundraising contributions across a wide range of credit strategies, including CLOs and other offerings. She also said alternative credit portfolios had “less than 10% exposure to software.” Co-President and Chief Commercial Officer Daniel Gamba added that the firm does not have a “big BDC” and emphasized continued fundraising momentum across evergreen alternatives strategies.

On evergreen private markets products, Johnson said the company has about $8 billion in “core evergreen products” and reported fundraising of about $200 million a month across three evergreen strategies, with demand holding consistent.

Chief Financial Officer Matt Nicholls clarified details around alternatives fee-earning assets. He said about 90% is “potential-to-earn fees”, while “current fee-generating AUM is about 80%” of the $283 billion alternatives total.

ETFs, SMAs, and Canvas drive personalization and tax-efficiency push

Johnson reported ETF AUM reached a new high of $61.6 billion, up 67% from the prior year, with $4.5 billion of net inflows, the firm’s 18th consecutive quarter of positive flows. She said active ETFs represent 45% of ETF AUM. She pointed to the conversion of 10 municipal funds into ETFs in the prior quarter, which generated over $600 million of positive net flows this quarter, and noted the Putnam Focused Large Cap Value ETF was “close to $10 billion in AUM.”

Gamba described ETFs as one of the firm’s “most exciting developments,” highlighting three primary growth drivers he said were powering inflows: active ETFs, single-country and regional ETFs, and systematic/smart beta. He also discussed ongoing conversations with distribution platforms about fees, saying the firm would prioritize partners that provide meaningful value in education, sales, and support, while Johnson noted that fee discussions depend on whether a platform can influence growth.

In retail SMAs, Johnson said Franklin Templeton managed $168.3 billion and generated $2.7 billion in net inflows during the quarter. Canvas, the firm’s custom indexing platform, reached record AUM of $22.9 billion, up 27% from the prior quarter, with $5.3 billion in positive net flows. Johnson said Canvas has been net flow positive every quarter since its acquisition in 2022 and is supported by “over 200 partners.”

On differentiation, Johnson said Canvas “was built by quant people as opposed to tax people,” emphasizing the technology’s flexibility and its evolution from direct indexing to tax-optimization overlays for active strategies. Gamba highlighted the firm’s scale in SMAs and described Canvas features including in-kind position handling, options for income, risk factor overlays, third-party manager tax optimization, long/short capabilities (including 130/30 and 140/40), and municipal bond ladders.

Executives also addressed investor questions about potential tax-rule changes affecting certain ETF-related tax strategies. Johnson said the firm has “not really participated” in some of the high-net-worth exchange strategies under discussion, and Gamba said the company’s major ETFs do not use options overlays in the way described in the question.

Expenses, AI investment, digital assets, and capital priorities

Nicholls provided quarterly guidance details and described expense assumptions, including compensation guidance of $830 million (assuming a $50 million performance fee at a 55% payout), IS&T of $155 million (which he said was slightly higher due to “AI investment specifically”), occupancy of $70 million, and G&A of $210 million–$215 million. He said G&A includes $23 million–$25 million of “elevated fundraising related fees” and $9 million–$10 million of additional advertising and marketing.

For the full year, Nicholls said the firm assumes flat markets from current levels and excludes performance fees, guiding expenses “approximately in line or slightly above fiscal year 2025,” excluding performance fees. He said this reflects higher sales and fundraising and “stronger performance” that increases formulaic compensation expenses. He also reiterated margin-expansion expectations, referencing commentary that would result in “fiscal fourth quarter margin in the high 29s” and “for the year in the 27s,” with an objective of “30%+ margins later in 2027.” Nicholls also confirmed that a voluntary buyout program referenced by the analyst is incorporated in the full-year projection.

On AI, Johnson said adoption is still early but outlined use cases across distribution, investments, operations, and technology, including a “multi-agent” “Intelligence Hub” built with Microsoft to help sales teams prioritize client interactions. She said early results showed salespeople “seeing 10% more clients,” though she said it was too early to quantify sales impact. Nicholls said the firm has a centralized, dedicated AI team and is tracking spending against cost savings and revenue benefits.

Johnson also discussed digital assets initiatives, including plans to acquire “250 Digital” and launch “Franklin Crypto.” She said blockchain can drive efficiency and highlighted exchanges as near-term distribution opportunities for tokenized products, noting Franklin has launched tokenized ETFs on Kraken and Ondo. She described potential institutional demand for crypto-venture exposure once the acquired team joins the firm later in the year.

Finally, Nicholls outlined capital-management priorities, citing the dividend, growing balance-sheet allocations to “C-capital and co-invest” (reported at $2.9 billion, with expectations for about $3 billion by year-end), employee-related share repurchases to offset dilution, opportunistic buybacks, and active consideration of M&A—primarily distribution-related partnerships and select bolt-ons in alternatives, particularly overseas.

About Franklin Resources NYSE: BEN

Franklin Resources, Inc, doing business as Franklin Templeton, is a global investment management organization that offers a wide range of asset management solutions to institutional and individual investors. The firm's core focus is on delivering active portfolio management across equities, fixed income, multi-asset strategies and alternative investments. Franklin Templeton's product lineup includes mutual funds, exchange-traded funds (ETFs), closed-end funds, separately managed accounts and sub-advisory services designed to meet varying risk-return objectives and income needs.

Founded in 1947 by Rupert H.

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