Franklin Profit Falls 6.2% as Clients Pull From Top FundsCharles Stein
Franklin Resources Inc., manager of the Franklin and Templeton mutual funds, said fiscal first-quarter profit fell 6.2 percent as investors pulled money from the firm’s best-known global bond funds.
Net income for the three months ended Dec. 31 declined to $566.4 million, or 91 cents a share, from $603.8 million, or 96 cents, a year earlier, the San Mateo, California-based company said today in a statement. Analysts had expected earnings of 94 cents, according to a survey of 17 analysts by Bloomberg.
Slowing growth in China and a rising U.S. dollar have hurt the returns of Franklin’s top-performing global bond funds, which have been the company’s strongest source of deposits since the financial crisis of 2008. The firm saw $3.5 billion in investor redemptions in the quarter, leaving assets little changed from a year earlier.
“Given all the volatility we’ve seen in global markets, Franklin is going to be challenged to show organic growth,” Michael Kim, an analyst with Sandler O’Neill & Partners, said in a telephone interview before earnings were released.
Kim cut his rating on Franklin to “hold” from “buy” earlier this month, one of three analysts who downgraded the stock in January.
Franklin fell as much as 3.8 percent, the biggest intraday decline since Dec. 12, and traded 1.9 percent lower at $51.65 by 10:20 a.m. in New York. Before today, the shares had fallen 4.9 percent this year, compared with a decline of 5.3 percent for the 18-member Standard & Poor’s index of custody banks and asset managers.
Michael Hasenstab’s $69 billion Templeton Global Bond Fund outperformed 99 percent of peers over the past decade, according to Morningstar Inc., helped by winning bets on bonds in countries from Ireland to Hungary. In the three years ended Dec. 31, 2011, the fund attracted $43 billion.
Last year the fund returned 1.6 percent, trailing 53 percent of rivals, according to data compiled by Bloomberg. Investors withdrew an estimated $2.8 billion in the quarter and $10 billion for the year from the U.S. and European versions of the fund, according to data compiled by Bloomberg.
Franklin managed $880.1 billion as of Dec. 31, down from $898 billion at the end of the previous quarter and little changed from $879.1 billion a year earlier.