Bloomberg News

Franklin’s Profit Increases 7.3% as Stock Markets Rally

February 01, 2013

Franklin Resources Inc. (BEN:US), manager of the Franklin and Templeton mutual funds, said fiscal first- quarter profit rose 7.3 percent as a rally in global stock markets boosted assets under management.

Net income for the three months ended Dec. 31 climbed to $516.1 million or $2.42 a share, from $480.8 million or $2.20, a year earlier, the San Mateo, California-based company said today in a statement. Twenty analysts (BEN:US) surveyed by Bloomberg expected profit averaging $2.38 a share.

Chief Executive Officer Gregory Johnson has been urging investors to put more money into stock funds, arguing that equities are likely to deliver better returns than they did in the past decade. Equity-oriented funds accounted for about 39 percent of Franklin’s $782 billion in assets at year-end.

“If retail investors get more comfortable with risk and we start to see them reallocate money to equities, Franklin should do well in that environment,” Michael Kim, an analyst with Sandler O’Neill & Partners LP in New York, said in a telephone interview before the results were announced.

Stock mutual funds in the U.S. attracted $14.3 billion in net new money in the week ended Jan. 9, the most since at least 2007, according to the Washington-based Investment Company Institute. Both domestic and international equity funds won money in the first two weeks of 2013, ICI data show.

Franklin’s equity assets climbed to $303 billion as of Dec. 31, up 12 percent for the year, as the MSCI All-Country World Index rose 13 percent in 2012. More than 70 percent of the firm’s stock assets are global or international.

Hasenstab’s Fund

The company’s flagship fund, the $67 billion Templeton Global Bond Fund, (TPINX:US) bounced back last year after it trailed 91 percent of rivals in 2011, according to data compiled by Bloomberg. The fund, managed by Michael Hasenstab, gained 16 percent in 2012, better than 90 percent of peers.

Hasenstab’s results were driven by bets on countries such Ireland and Hungary, whose bonds rallied 29 percent and 22 percent, according to Bank of America Merrill Lynch index data. Templeton Global Bond had 9 percent of its money in Irish bonds and 5.8 percent in Hungarian bonds as of Nov. 30, according to a regulatory filing.

Hasenstab’s fund attracted $1.5 billion in deposits in the fourth quarter, data from Chicago-based Morningstar Inc. (MORN:US) show. That compares with $355 million in the third quarter. Hasenstab manages more than $175 billion.

Franklin in September agreed to pay about $183 million for a majority stake in K2 Advisors Holdings LLC, a fund-of-hedge- fund manager with $9.3 billion in assets. Starting in 2016, Franklin will acquire the rest of Stamford, Connecticut-based K2 over a period of years.

Before today, Franklin’s shares gained 8.9 percent this year compared to an increase of 10 percent for the 20-member Standard and Poor’s Index of custody banks and asset managers.

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

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net


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Companies Mentioned

  • BEN
    (Franklin Resources Inc)
    • $54.61 USD
    • -0.19
    • -0.35%
  • TPINX
    (Templeton Global Bond Fund/United States)
    • $13.27 USD
    • 0.03
    • 0.23%
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