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Franklin's October AUM Perks Up

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Franklin Resources Inc. (BEN - Free Report) declared preliminary assets under management (AUM) of $753.9 billion by its subsidiaries for the month of October 2012. The company’s results witnessed a rise of 0.5% from $749.9 billion as of September 30, 2012. Moreover, it increased 8.6% from $694.1 billion as of October 31, 2011.

Month-end total equity assets came in at $295.2 billion, declining 0.6% from the prior month but increasing 4.7% 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 $341.9 billion, inching up 1.7% from $336.3 billion as of September 30, 2012, and 11.0% from $308.1 billion as of October 31, 2011. Overall, tax-free assets accounted for only 25% of the fixed income assets, while the remaining 75% were taxable.

Franklin recorded $110.8 billion in hybrid assets, which marginally grew 0.6% from $110.1 billion in the prior month. Moreover, hybrid assets surged 14.5% from $96.8 billion recorded in the prior-year month. Cash management funds were reported at $6.0 billion, down from $6.4 billion in the prior month and also waning from $7.3 billion in the prior-year month.

Quarterly Performance

On a quarterly basis, as of September 30, 2012, total AUM was $749.9 billion, up from $707.1 billion as of June 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.

Among Franklin’s peers, Invesco Ltd. (IVZ - Free Report) is expected to announce its preliminary month-end AUM for October earlier next week.

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