Feb 1 Money manager Franklin Resources Inc
, which runs the Franklin and Templeton funds, said
Friday its quarterly profit grew 7 percent, beating analysts'
expectations even as additional investments from customers
slowed to a trickle.
Net income for Franklin's fiscal first quarter through Dec.
31 totaled $516.1 million, or $2.42 per share, compared with
$480.8 million, or $2.20 per share, a year earlier, the San
Mateo, California-based firm said.
Analysts had, on average, expected net income of $2.38 per
share, according to Thomson Reuters I/B/E/S.
Investors lauded the results, sending shares of Franklin up
$2.09, or 1.5 percent, to $138.97 on the New York Stock
Exchange. The stock has gained 10 percent so far this year,
outperforming a 6 percent advance on the Standard & Poor's 500
Customers added only about $300 million to Franklin's funds
and accounts during the quarter, down considerably from $2.9
billion in the prior three months. But market appreciation and
other gains added $24.8 billion, and acquisitions added $8.7
billion. Franklin ended the quarter with total assets under
management of $781.8 billion, up 17 percent from a year earlier.
Customer flows slowed across the money management industry
in the quarter, amid investor concerns about the extended budget
showdown between lawmakers in Washington, D.C. over how to avert
automatic spending cuts and tax hikes that were to have kicked
in early this year.
Franklin competitor Invesco also saw dramatically
reduced inflows while T. Rowe Price Group and Janus
Capital Group reported net outflows from customers.
And, like the rest of the industry, Franklin's fortunes
improved in January, after the end of the quarter.
Noting that Franklin has typically seen strong inflows in
the past in January, Chief Executive Greg Johnson said on a call
with analysts: "We expect that to carry through" this year.
Inflows of $6.9 billion into Franklin's fixed income
products were nearly offset by outflows of $6.4 billion from
equities. Customers also added $500 million to hybrid funds and
withdrew $700 million from money market funds.
Strong fund performance should help flows improve for the
rest of the year, analysts said.
The performance and broad, global sales network should
"increasingly drive consistent market share gains," Michael Kim,
an analyst at Sandler O'Neill Partners, wrote in a report after
the earnings were announced.
In September, Franklin announced it was buying K2 Advisors,
a fund of hedge funds manager. The firm could use K2's
capabilities to develop a mutual fund aimed at retail investors,
CEO Johnson said.
"That's something we're looking at, certainly," he said.