EUR 850.00 For Business Accounts Only

Morningstar | BEN Updated Star Rating from 07 Jan 2019

A confluence of several different issues--poor relative active investment performance, the growth and acceptance of low-cost index-based products, and the expanding power of the retail-advised channel--has made it increasingly difficult for asset managers running predominantly active portfolios to generate organic growth, leaving them more dependent on market gains to drive assets under management levels higher. While we continue to believe there will be room for active management, which is hard to do in an environment where an overwhelming majority of the flows are going into index funds and ETFs, we feel that the advantage when it comes to getting placement on platforms will go to asset managers that have greater scale, established brands, solid long-term performance, and reasonable fees.With $683.3 billion in total AUM at the end of November 2018, Franklin Resources has the size and scale necessary to be competitive in the industry. The firm has well-known brands--Franklin, Templeton, and Mutual Shares--and a diverse product mix, with 42% of managed assets dedicated to equity strategies, 19% in hybrid funds, and 38% in fixed-income. While product distribution is weighted toward retail investors (73% of AUM), the firm has historically maintained strong relationships with financial advisors. Franklin is also one of the more global U.S.-based asset managers, with half of its total AUM invested in global/international strategies and one third of its managed assets sourced from clients domiciled outside the United States.During the past five (10) fiscal years, Franklin's organic growth rate averaged a negative 6.5% (negative 1.4%) with a standard deviation of 3.9% (7.3%), which was worse than the industry, which generated negative 0.6% (positive 0.7%) average annual organic growth with a standard deviation of 2.1% (3.1%). As we expect the headwinds for the asset managers to be stiffer as we move forward, we envision Franklin generating negative 4%-6% average annual organic AUM growth, with slightly better levels of revenue growth but lower margins on average during fiscal 2019-23.