Analyzing Franklin Resources (BEN)

• BEN reported better than expected September-end AuM of $511.3 bn compared to our $508 bn forecast. The month saw a +104 bp MoM increase for Total Equities, an +88 bp MoM in global, and hybrid, which includes the $40 billion+ Franklin Income Series fund, one of the largest inflowing Franklin Templeton funds recorded a +191 bp MoM gain.
  
  
• BEN's broad product offerings, dominated by value and global investment strategies, have contributed to strong relative investment performance. Alongside continued focus on customer service, BEN has generated a loyal following among its clients and the financial advisers who recommend and distribute its funds.
  
  
• The September data point marks a slight moderation in the rate of change. BEN's AuM +113 bp MoM vs a +227 bp increase last month. Despite its acquisitive history, I think BEN's management favors organic growth.
  
  
• The interests of BEN's management are closely aligned with those of shareholders given that directors, director nominees and executive officers as a group owned about 35% of the outstanding float, always a positive sign. Overall growth in AuM was greater than expected, hence I expect it to outperform its peers.
  
  
• I believe BEN will continue to outperform the asset management sector given improving fund flows, a strong balance sheet and ability to use its excess cash to buy back shares and potentially make acquisitions.
  
  
• I believe strong overall international fund flows will drive overall AuM growth at a faster than average rate.