MutualFundWire.com: Three Percent of Franklin's Staff Take Buyouts; AUM Falls Five Percent

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Wednesday, February 10, 2016

Three Percent of Franklin's Staff Take Buyouts; AUM Falls Five Percent

Both AUM and headcount are slipping at Franklin Templeton [profile].

Gregory E. Johnson
Franklin Resources
Chief Executive Officer

On Monday San Mateo, California-based Franklin Resources (Franklin Templeton's parent) revealed that in January its AUM fell by $35.8 billion (4.69 percent), to $728.1 billion on January 31. And last week in its latest 10-Q quarterly report, Franklin revealed that about 300 employees (3.19 percent of Franklin's roughly 9,400 employees worldwide) received "special termination benefits" for "voluntary separation," otherwise known as a buyout.

Barron's picked up on Franklin's AUM numbers. And last week on the company's fiscal Q1 2016 earnings call with analysts, Franklin chairman and CEO Greg Johnson mentioned (per Seeking Alpha's transcript of the call) "some staff reductions" thanks to the "voluntary retirement plan" described in the 10-Q. Johnson brought the buyouts up when fielding questions, from Morgan Stanley analyst Michael Cyprys, about how Franklin is trimming expenses.

Here's a different spin on that AUM drop. Franklin's January 31, 2016 AUM of $728.1 billion was down $143.5 billion or 16.5 percent year-over-year.

Johnson began the call with a short introduction addressing Franklin's recent woes:

Although we faced a number of headwinds impacting investment performance and flows, we've been through periods like this before. And it's one of the reasons we value diversification and a strong balance sheet. As we work through these challenges, and maintain our focus on expense management, we will continue to invest in a number of long-term growth opportunities, including strategic beta ETF, liquid alternatives, and related solutions while delivering our value-added services to a growing customer base around the world.

Franklin reported net income of $0.74 per diluted share for fiscal Q1 2016, missing estimates by $0.01. It brought in $1.758 billion in operating revenue and suffered $20.6 billion in quarterly net outflows (down 28 percent from $28.6 billion in net outflows in in the previous quarter).

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