Franklin Third-Quarter Profit Rises 21% Amid Stock RallyCharles Stein
Franklin Resources Inc., manager of the Franklin and Templeton mutual funds, said fiscal third-quarter profit climbed 21 percent as rising global stock markets boosted assets under management.
Net income for the three months ended June 30 increased to $552.3 million, or 86 cents per share, from $455.3 million, or 71 cents, a year earlier, the San Mateo, California-based company said today in a statement. Analysts had expected earnings of 85 cents a share, according to the average of 14 estimates in a Bloomberg survey.
Franklin benefited as gains in equity prices and deposits into fixed-income funds lifted assets from the previous year. Federal Reserve Chairman Ben S. Bernanke triggered a selloff across global markets and pushed interest rates higher last month by outlining plans to phase out the U.S. central bank’s asset purchases. Franklin drew $8.4 billion in new investor cash in the quarter, reducing the impact of $16.3 billion in market declines on the firm’s assets.
“While June was a tough month, management did highlight that flow trends, specifically redemptions, had improved in July,” Daniel Fannon, a San Francisco-based analyst at Jefferies & Co., wrote today in a note to clients.
Franklin fell 1.2 percent to $48.08 in New York trading, as the Standard & Poor’s 20-company index of asset managers and custody banks declined 1.1 percent. Franklin slid 12 percent in June, making it the second-worst performer in the asset managers index.
Chief Executive Officer Greg Johnson, in recorded remarks posted on the firm’s website today, said the impact of the bond-market selloff may be temporary and that investor sentiment improved in July.
“Bond markets tend to be self-healing,” he said. “Higher yields attract new investors.”
Investors around the world pulled a record $5.63 billion from global bond funds in the week ended June 26, according to data from Cambridge, Massachusetts-based EPFR Global.
They withdrew $611 million from the $70 billion Templeton Global Bond Fund in June, data from Chicago-based Morningstar Inc. show. The flagship fund, managed by Michael Hasenstab, attracted more than $5.6 billion in the first five months of 2013.
Hasenstab, who oversees more than $195 billion, beat 64 percent of peers this year and 90 percent over the past five years, according to data compiled by Bloomberg.
Hasenstab, in a June 25 interview posted on Franklin’s website, described the bond selloff as a bout of risk-aversion. “It pretty much happens every year at some point,” he said. “So we’re not terribly concerned about these short-term periods of panic.”
Franklin had $365.7 billion, or 45 percent of its $815 billion in assets, in bonds as of June 30. Stocks accounted for 38 percent. Franklin’s assets grew 15 percent in the 12 months through midyear, helped by a 17 percent gain in the MSCI All Country World Index, including dividends.
For the past few years the company has been urging retail investors to put more money into stocks, arguing that the shift to bonds since the financial crisis has been overdone.
“That has been a challenging message to deliver,” Johnson said in his recorded comments.
Investors pulled $3.4 billion from the company’s stock funds in the quarter ended June 30. They added $8.1 billion to bond funds, $2.7 billion to hybrid funds, and $1 billion to cash products.
The company last month named Greg Johnson chairman of the firm after his father, Charles Johnson, retired.
Franklin declared a 3-for-1 stock split on June 13 that altered the earnings per share originally reported in 2012. Companies typically split their stock when they determine the share price has become too high for individual investors.