Management guides to exceed $30B private markets fundraising target for fiscal 2026
Franklin Resources reported strong quarterly results with record gross sales and $16.9 billion in long-term net flows, driven by strength across private markets, ETFs, and Canvas. Management expressed a confident outlook, guiding for continued margin expansion and is actively fundraising for its flagship funds, notably Lexington's secondary PE fund. Delivered record gross sales with long-term net inflows of $16.9 billion, including positive flows across all regions.
Buzzberg readManagement guides to exceed $30B private markets fundraising target for fiscal 2026Franklin Resources reported strong quarterly results with record gross sales and $16.9 billion in long-term net flows, driven by strength across private markets, ETFs, and Canvas. Management expressed a confident outlook, guiding for continued margin expansion and is actively fundraising for its flagship funds, notably Lexington's secondary PE fund. Delivered record gross sales with long-term net inflows of $16.9 billion, including positive flows across all regions.Read full analysisCollapse analysis
Franklin Resources reported strong quarterly results with record gross sales and $16.9 billion in long-term net flows, driven by strength across private markets, ETFs, and Canvas. Management expressed a confident outlook, guiding for continued margin expansion and is actively fundraising for its flagship funds, notably Lexington's secondary PE fund. Delivered record gross sales with long-term net inflows of $16.9 billion, including positive flows across all regions.
Private markets fundraising was strong at $13.2 billion, positioning the company to exceed its upwardly revised $25-30 billion annual target.
Canvas, the tax-optimization platform, hit a record AUM of $22.9 billion, growing 72% CAGR and doubling AUM in the last 12 months.
Announced plans to acquire 250 Digital and launch Franklin Crypto, expanding digital asset offerings.
Revenue$2.2949B
-1% QoQ
EPS$0.71
+1% QoQ
Gross margin52.83%
reported
Op margin14.09%
reported
What changed this quarter
01
Guidance
Management guides to exceed $30B private markets fundraising target for fiscal 2026
Guidance tone
02
Demand
Private credit was largest fundraising contributor in the quarter
Management expressed strong confidence in the business, highlighting record flows, beating fundraising targets, and viewing the company as 'ahead of its five-year plan'.
03
Demand
Canvas AUM grew 27% quarter-over-quarter to $22.9B
Private credit was largest fundraising contributor in the quarter. Management expressed strong confidence in the business, highlighting record flows, beating fundraising targets, and viewing the company as 'ahead of its five-year plan'.
04
AI
AI distribution hub increases salesperson client meetings by 10%
Management described AI as a key growth and efficiency driver, with early adoption in a multi-agent 'intelligence hub' for distribution showing 10% more client meetings per salesperson, and investment teams using AI-created agents and a virtual research analyst. They are…
AI, capex & demand read
AI
Platform & monetization
Management described AI as a key growth and efficiency driver, with early adoption in a multi-agent 'intelligence hub' for distribution showing 10% more client meetings per salesperson, and investment teams using AI-created agents and a virtual research analyst. They are investing in AI (raising IS&T expenses) and tracking effectiveness versus efficiency gains, but say it is still very early days
Demand
Bookings & conversion
Private credit was largest fundraising contributor in the quarter. Management expressed strong confidence in the business, highlighting record flows, beating fundraising targets, and viewing the company as 'ahead of its five-year plan'.
Capex
Investment and capacity
Management did not discuss capital expenditure or capacity investment directly, but noted increased IS&T expenses due to AI investments and elevated G&A related to fundraising. They also mentioned strategic capital allocation to organic growth initiatives like co-investments, with balance sheet allocation increasing to $2.9 billion.
Tone · Confident
Management expressed strong confidence in the business, highlighting record flows, beating fundraising targets, and viewing the company as 'ahead of its five-year plan'.
Supply-chain alpha
A1
Franklin Templeton's private credit portfolios have less than 10% exposure to software, a significant differentiator versus peers amid market concerns about software lending.
“we are also seeing a pickup in demand for private real estate, including in the wealth channel as investors position for opportunities emerging from the current market environment.”
Hey, good morning. Thanks for taking the question. I wanted to ask about AI. I was hoping you could update us on how you're using AI across the organization today and some of the use cases that have been most impactful so far and some of the key learnings that you've had. And if you're able to help quantify any of the benefits that you're seeing, that would be interesting. And as you look at over the next couple of years, can you talk about some of the steps that you're taking to further embed AI throughout the organization? I know, Matt, you mentioned some uplift on expenses in part from AI investments. Maybe you could elaborate on some of those investments and how you're thinking about…
Yeah, so we look at AI. Look, having run technology, I don't think that there are many companies that they can sit there and say that the AI has yet to be material in their organization, and everybody's doing a ton of stuff in it. I'm proud of the work that we've done because we were early adopters in what is this multi-agent orchestration of AI, and that was the intelligence hub, what we call intelligence hub, which was our platform used for distribution. The way, if I were to bucket the AI efforts, I would say with respect to distribution and investments, it's all about growth opportunities with respect to operations and technology. Operations, it's about growth. efficiencies, and in technologies, it ultimately will be about getting more through the pipeline. So with this multi-agent intelligence hub, we'll start there. This is the one that we announced the partnership with Microsoft, and they came in and helped us build it. And I say it's a very simple problem with a complex technical solution. The simple problem is how do you ensure that your salespeople are seeing the right clients and having the best conversations? That goes in and it pulls data from your CRM system, from your product system, external product systems, maybe social media. Those are multiple agents, and LLM models tend not to be great with analytics, so you have to marry them with others. We are seeing early on uplift of our wholesalers or, you know, our salespeople essentially seeing 10% more clients. I'm not going to share sort of the preliminary numbers. It's too early to sort of dictate whether that's translated directly into additional sales or but from just the efficiency of the administration, and it is looking like we are also getting an uplift in sales from those, and we're rolling that out more broadly. Our investment teams are using it a little bit, you know, depending on the team, but we have hackathons done by our investment teams. They create agents. Those agents are put in a central library. We've been doing this for quite a while. I can't remember the number that we have. And so another investment team may, you know, decide, oh, I'm going to pull this agent out We also created a virtual research analyst that sits in one of our investment teams where they have fed in kind of the views and the philosophy. And it will question. It will come up with investment ideas. And it …
PERPLEXITY
Private company
Supply chain
CEO's use of Perplexity as a research tool signals adoption of the platform in enterprise settings, a positive validation signal for Perplexity's business model.
“Yeah, and actually I just looked it up on Perplexis, and I have a better understanding of what you're saying.”
Yeah, it's a bit arcane, but apparently in the index ETF world, there's some discussion between, I think, ICI and the IRS. Excuse me. Sorry, I'd be so ticky-tacky on this call. Just in terms of adverse ruling about tax optimization under the exchange, would that limit maybe the use of options and so forth as a way to shield income? A bit arcane, but it's been coming up as a watch point given the really rapid growth in tax optimization.
Yeah, and actually I just looked it up on Perplexis, and I have a better understanding of what you're saying. So there are people, there are some strategies for hard net worth where people will contribute in exchanges, and we have not really participated in that. That is one. that you could and it could impact ETF share classes as part of a mutual fund. We'll see how that evolves.
Franklin Templeton's private credit portfolios have less than 10% exposure to software, a significant differentiator versus peers amid market concerns about software lending. — This suggests resilience for these funds and signals a potential competitive advantage versus BDCs with heavy software exposure.
… our 25 to 30 billion annual fundraising target, which was already adjusted upward at the start of our fiscal year. Within alternatives, private credit continues to be an area of focus. While market attention has increased, the opportunity remains highly differentiated across strategies and risk profiles. Our alternative credit capabilities in the US and Europe are focused on the middle market with a disciplined approach to underwriting and credit selection and include diversified portfolios that have less than 10% exposure to software. Alternative credit represents 96 billion in AUM and was a significant contributor to fundraising this quarter. Looking across our broader alternatives platform, we continue to see strong momentum in secondary private equity, where investors are increasingly focused on liquidity solutions, portfolio rebalancing, and access to high-quality assets at more attractive entry points. We are also seeing a pickup in demand for private real estate, including in the wealth channel, as investors position for opportunities emerging from the current market environment. Franklin Templeton's private markets 8 billion core evergreen products spanning …
Franklin's Canvas platform is growing at a 72% CAGR, with AUM doubling in the past 12 months, driven by the trend towards tax-efficient investing. — High growth in tax-optimization platforms like Canvas signals a fundamental shift in asset management that competitors and financial advisors must adapt to.
Hi, thanks very much. So question maybe on Canvas and tax optimization strategies. Seen a lot of growth. You commented on yours. I'm just curious. There's a lot of competition, but there's also really low penetration. So I wonder if you could talk to about what you see for further growth in terms of penetrating the current base of clients, any capacity issues you might see, and then very importantly, how you differentiate in a crowded field, meaning leveraging that brand and distribution relationship that you have.
Management answer
Daniel GambaCo-President and Chief Commercial Officer
Yeah, so I will add two aspects to the success we're having actually on the tax alpha and tax optimization space. which is one space that's really growing very, very fast for the industry. And we're absolutely capitalizing on that. I'll say number one, clearly our retail SMA presence being so big at close to $170 billion makes us very uniquely positioned, including, of course, the legacy business that we have on the SMA side. And on the Canvas side, there's two elements to highlight. One, is the tax optimization that we do is quite unique and differentiated because we do receive in-kind positions from clients. We do that, and we're very flexible in how we do the optimization, and clients are absolutely looking at that. And the other part is we add a lot of simplicity, and we're very innovating. Canvas includes, as Jenny mentioned, not only direct indexing, but we also have risk factor overlays. We have options for income within the same platform. And we have added now fundamental third-party manager tax optimization, including for our different fundamental managers. We're adding that. On top of that, we're adding long-short. So long-short has already been built into that. We have 130-30, 140-40, all in the same platform. And finally, we also are adding, and we actually added already, municipal bond ladders in the same platform. So the simplicity is giving us substantial momentum to the degree that it's actually grown at 72% CAGR, and it's grown actually 10 times since acquisition at $23 billion. So I think the momentum will continue. The AUM doubled over the past 12 months, and we expect that to continue, given how differentiated the platform is.
Franklin sees increased demand for private real estate in the wealth channel, which they attribute to investors seeking inflation hedges and income. — This indicates a capital rotation into private real estate which benefits large alternative asset managers like Brookfield.
Hey, good morning. Thanks for taking the question. I wanted to ask about AI. I was hoping you could update us on how you're using AI across the organization today and some of the use cases that have been most impactful so far and some of the key learnings that you've had. And if you're able to help quantify any of the benefits that you're seeing, that would be interesting. And as you look at over the next couple of years, can you talk about some of the steps that you're taking to further embed AI throughout the organization? I know, Matt, you mentioned some uplift on expenses in part from AI investments. Maybe you could elaborate on some of those investments and how you're thinking about…
… us to exceed our 25 to 30 billion annual fundraising target which was already adjusted upward at the start of our fiscal year within alternatives private credit continues to be an area of focus while market attention is increased the opportunity remains highly differentiated across strategies and risk profiles Our alternative credit capabilities in the US and Europe are focused on the middle market with a disciplined approach to underwriting and credit selection and include diversified portfolios that have less than 10% exposure to software. Alternative credit represents 96 billion in AUM and was a significant contributor to fundraising this quarter. Looking across our broader alternatives platform, we continue to see strong momentum in secondary private equity, where investors are increasingly focused on liquidity solutions, portfolio rebalancing, and access to high quality assets at more attractive entry points. We are also seeing a pickup in demand for private real estate, including in the wealth channel as investors position for opportunities emerging from the current market environment. Franklin Templeton's private markets, eight billion core evergreen products spanning secondary private equity, real estate equity and debt and private credit continue to gain traction. These products had positive net flows contributing approximately $1 billion to fundraising in aggregate in each of the last two quarters. Across the platform, clients are increasingly engaging with us for broad and differentiated investment vehicles, and we're seeing that demand translate into sustained diversified growth. ETF AUM reached a new high of 61.6 billion, a 67% increase from last year, with 4.5 billion of net inflows, our 18th consecutive quarter of positive flows. Active ETFs now represent 45% of ETF AUM, further extending our active management strategies into new vehicles. This is evident in areas such as the conversion of 10 of our muni funds into ETFs in Q1, which generated over $600 million in positive net flows this quarter, or the success of our Putnam-focused large-cap value ETF, which is close to $10 billion in AUM. Delivering personalization at scale continues to represent a compelling long-term opportunity. Advancements in technology are enabling us to extend capabilities traditionally associated with separately managed accounts more efficiently and consistently …
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