On Monday, Franklin Resources Inc. (BEN) reported preliminary month-end assets under management (AUM) of $570.5 billion by the company’s subsidiaries for the month of June, almost flat compared with $572.7 billion in the previous month. AUM for June was, however, up 26.4% on a year-over-year basis.
At the end of the month, total equity assets were $236.1 billion, up 2.1% sequentially and 12.5% on a year-over-year basis. Total fixed income assets were $226.5 billion, up 2.0% sequentially and 52.9% on a year-over-year basis.
Franklin recorded $101.6 billion in hybrid assets, down 1.3% sequentially but up 18.5% on a year-over-year basis.
Cash management funds as reported were $6.3 billion, down 6.0% sequentially and 16% on a year-over-year basis.
Franklin offers a wide range of investment products under equity, hybrid, fixed-income and cash management funds. Revenue depends principally on the level and relative mix of AUM.
During the first quarter of fiscal year 2010, the recovery of global economy became quite apparent. With a continuous improvement in market conditions, Franklin’s AUM and fee revenues improved steadily.
In the first half of fiscal 2010, Franklin reported AUM of $586.8 million, up 6.0% sequentially and 50% on a year-over-year basis, primarily due to market appreciation and positive net new flows. The improvement was seen for both equity and fixed-income products due to higher sales and lower redemptions.
Franklin is slated to release its third fiscal quarter 2010 operating results on July 29, 2010, before the opening bell. The Zacks Consensus Estimate for the quarter is earnings of $1.52 per share.
We believe Franklin’s global footprint is actually favorable from a strategic perspective, since its AUM is well diversified. This coupled with a strong balance sheet and ongoing cost control efforts undertaken by management, will act as a cushion for the company.
Franklin is not immune to the volatile economic environment. As a result, its revenues and AUM have suffered of late. However, earnings for 2010 are expected to improve as the environment for asset managers gradually recovers with increased demand from recuperating markets.
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