Franklin's September AUM Edges Up

Franklin Resources Inc. (BEN - Analyst Report) declared preliminary assets under management (AUM) of $749.9 billion by its subsidiaries for the month of September 2012. The company’s results witnessed a rise of 2.6% from $731.0 billion as of August 31, 2012. Moreover, it increased 13.6% from $659.9 billion as of September 30, 2011.

Month-end total equity assets came in at $297.1 billion, improving 3.1% from the prior month and 16.9% on a year-over-year basis. Of the total equity assets, around 72% were from international sources, while the remaining 28% were from the U.S.

Total fixed income assets were $336.3 billion, inching up 2.1% from $329.3 billion as of August 31, 2012, and 13.0% from $297.7 billion as of September 30, 2011. Overall, tax-free assets accounted for only 25% of the fixed income assets, while the remaining 75% were taxable.

Franklin recorded $110.1 billion in hybrid assets, which augmented 2.5% from $107.4 billion as of August 31, 2012. Moreover, hybrid assets surged 8.7% from $101.3 billion recorded in the prior-year month. Cash management funds were reported at $6.4 billion, up from $6.2 billion in the prior month but waning from $6.7 billion in the prior-year month.

Quarterly Performance

On a quarterly basis, as of June 30, 2012, total AUM was $707.1 billion, sliding from $725.7 billion as of March 31, 2012, attributable to market depreciation of $22.5 billion, partially offset by net new flows of $4.8 billion. Moreover, AUM decreased 4% on a year-over-year basis, mainly due to market depreciation of $32.0 billion.

Simple monthly average AUM of $710.7 billion during the quarter climbed 1% sequentially but declined 2% year over year. Net new flows were $4.8 billion versus $5.6 billion in the prior quarter and $21.7 billion in the prior-year quarter.

Our Viewpoint

Franklin's global footprint is an exceptionally favorable strategic point as its AUM is well diversified. The company is also poised to benefit from its strong balance sheet. However, regulatory restrictions and sluggish economic recovery could mar AUM growth and alleviate costs. Additionally, lower revenues remain a matter of concern.

Franklin currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. However, considering the fundamentals, we maintain a long-term ‘Neutral’ recommendation on the stock.

Among Franklin’s peers, Invesco Ltd. (IVZ - Analyst Report) is expected to announce its preliminary month-end AUM for September later this week.