Franklin's November AUM Advances

Franklin Resources Inc. (BEN - Analyst Report) declared preliminary assets under management (AUM) of $768.8 billion by its subsidiaries for the month of November 2012. The company’s results witnessed a rise of 2.0% from $753.9 billion as of Oct 31, 2012. Moreover, it increased 13.8% from $675.8 billion as of Nov 30, 2011.

Month-end total equity assets came in at $295.4 billion, increasing 0.1% from the prior month but elevating 7.7% on a year-over-year basis. Of the total equity assets, around 73% were from international sources, while the remaining 27% were from the U.S.

Total fixed income assets were $348.5 billion, inching up 1.9% from $341.9 billion as of Oct 31, 2012, and 16.2% from $299.8 billion as of Nov 30, 2011. Overall, tax-free assets accounted for only 25% of the fixed income assets, while the remaining 75% were taxable.

Franklin recorded $118.9 billion in hybrid assets, which augmented 7.3% from $110.8 billion in the prior month. Moreover, hybrid assets surged 25.7% from $94.6 billion recorded in the prior-year month. Hybrid assets of the month under review included the acquisition of K2 Advisors of approximately $8.7 billion.

Cash management funds were reported at $6.0 billion, in line with the prior month and waning from $7.2 billion in the prior-year month.

Quarterly Performance

On a quarterly basis, as of Sep 30, 2012, total AUM was $749.9 billion, up from $707.1 billion as of Jun 30, 2012, driven by market appreciation of $40.8 billion and net new flows of $2.9 billion.

Simple monthly average AUM of $726.7 billion during the quarter climbed 2% sequentially. Net new flows were $2.9 billion versus $4.8 billion in the prior 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, higher expenses remain a matter of concern.

Franklin currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We believe the acceleration in AUM amid volatile markets might lead to positive estimate revisions. This, in turn, could cause an improvement in the Zacks Rank.

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