Global asset manager Franklin Resources finds itself in a familiar industry predicament: client funds are exiting even as rising markets push its assets under management to unprecedented levels. The firm’s preliminary August AUM of $1.64 trillion, up from $1.62 trillion the previous month, masks a more troubling underlying trend of substantial net outflows.
A significant long-term net outflow of $3 billion was largely concealed by positive market performance. The majority of this capital movement was attributed to the departure of a single fixed-income mandate worth $6 billion.
The firm’s subsidiary, Western Asset Management, proved particularly burdensome to overall results, reporting net outflows of $7 billion. Excluding this segment, the parent company would have actually recorded net inflows of $4 billion. One bright spot emerged from the cash management division, which attracted $5 billion in new funds.
Should investors sell immediately? Or is it worth buying Franklin?
For asset management firms like Franklin Resources, sustained client redemptions represent the most significant threat to business stability. Even robustly rising markets cannot indefinitely compensate for a fundamental loss of investor confidence. These latest figures underscore the continuing pressure facing the actively managed funds sector.
All eyes now turn to November, when Franklin Resources releases its quarterly earnings. Investors will be watching closely to determine whether the company can reverse its flow trajectory, or if surpassing the trillion-dollar mark merely represents a milestone on a downward path.
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