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Franklin's Quarterly Earnings Increase as Investors Flock to Global Funds

Franklin Resources Inc., manager of the Franklin and Templeton mutual funds, said fiscal second- quarter earnings more than tripled on rising stock prices and inflows to the firm’s global investment products.

Net income for the period ended March 31 climbed to $356.7 million or $1.55 a share, from $110.8 million, or 47 cents, a year earlier, the San Mateo, California-based company said today in a statement. The average estimate of 17 analysts surveyed by Bloomberg was $1.57 a share.

Franklin benefited as the MSCI World Index, a proxy for global stocks, climbed 49 percent in the year ended March 31. Franklin’s net inflows for the quarter were $17.4 billion, with investors putting $15.2 billion into global bond funds and pulling $500 million from equity funds.

“People around the world are interested in global products and Franklin has a range of them,” Jeffrey Hopson, an analyst at Stifel Nicolaus & Co. in St. Louis, said in an interview before earnings were released. Hopson has a “buy” rating on the stock.

Franklin rose $1.23, or 1.1 percent, to $114.20 in New York Stock Exchange Composite trading as of 4:15 p.m.

Investors in the quarter deposited a record $46 billion in global bond funds, according to EPFR Global, a Cambridge, Massachusetts-based research firm. About 33 percent of Franklin’s $586.6 billion in assets are in global stocks and 17 percent are in international bonds, according to the company.

The company, which has emphasized its sales outside the U.S., said 28 percent of its assets come from international investors, up from 26 percent in the previous quarter. More than 50 percent of net sales in the quarter were from non-U.S. investors, Franklin data show.

Room to Grow

Institutional investors have put only a small portion of their assets in global bonds, leaving room for the asset class to grow, said Douglas Sipkin, a New York-based analyst with Ticonderoga Securities, in a telephone interview.

“With a top-rated fund, Franklin is well positioned,” he said.

The $32 billion Templeton Global Bond fund attracted $5.2 billion in the quarter, second-most among U.S. mutual funds, according to estimates from Chicago-based Morningstar Inc. The Pimco Total Return fund’s estimated net inflows of $12.3 billion were the biggest.

Templeton Global Bond, managed by Michael Hasenstab, returned 11 percent annually in the past five years, better than 97 percent of rivals, Bloomberg data show.

U.S. mutual fund investors continue to favor bonds over stocks, according to Morningstar data. Bond funds attracted $89 billion in the three months ended March 31, compared with $21 billion for equity funds.

To contact the reporter on this story: Charles Stein in Boston at cstein4@bloomberg.net

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