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Franklin's June AUM Declines

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Franklin Resources Inc. (BEN - Free Report) declared preliminary assets under management (AUM) of $815.0 billion by its subsidiaries for Jun 2013. The results depicted a 3.7% fall in AUM from $846.5 billion as of May 31, 2013. However, it increased 15.3% from $707.1 billion as of Jun 30, 2012.

Month-end total equity assets came in at $313.5 billion, down 4.0% from the prior month but up 12.5% 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 $365.7 billion, declining 4.2% from $381.8 billion as of May 31, 2013, but augmenting 14.5% from $319.5 billion as of Jun 30, 2012. Of the fixed income assets, approximately 22% was tax-free and the remaining 78% was taxable.  

Franklin reported hybrid assets of $129.4 billion, down 2.2% from $132.3 billion in the prior month but up 25.4% from $103.2 billion in the prior-year month.

Cash management funds were $6.4 billion, up 10.3% from the prior month as well as the prior-year month.

Quarterly Performance

As of Mar 31, 2013, Franklin reported total AUM of $823.7 billion, up from $781.8 billion as of Dec 31, 2012, driven by market appreciation of $24.5 billion and net new flows of $18.3 billion.

Simple monthly average AUM of $807.3 billion during the quarter climbed 6% sequentially. Net new flows were $18.3 billion versus $0.3 billion in the prior quarter.

Among other asset managers, Legg Mason Inc. (LM - Free Report) and Invesco Ltd. (IVZ - Free Report) are expected to release their preliminary AUM for Jun 2013 by the end of this week.

Our Viewpoint

Franklin's global footprint is an advantage as it enables the diversification of its AUM. The company is also poised to benefit from its strong balance sheet. However, regulatory restrictions and sluggish economic growth could mar AUM improvement as well as increase costs. Additionally, higher expenses remain a matter of concern.

Franklin is scheduled to release fiscal third-quarter 2013 results on Jul 29, 2013. The Zacks Consensus Estimate for the quarter is $2.61. The Zacks Earnings ESP (Read: Zacks Earnings ESP: A Better Method) for Franklin is -2.30% for the third quarter. This, combined with its Zacks Rank #3 (Hold), reduces the chances of a positive earnings surprise.

Fortress Investment Group LLC is a better performing company in the same industry with a Zacks Rank #1 (Strong Buy).

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