BEN's November-End AUM Results - Analyst Blog

California-based Franklin Resources Inc. (BEN) reported impressive year-over-year growth in its preliminary month-end assets under management (AUM) by its subsidiaries on December 8. The company's AUM of $642.3 billion at the end of November 30, 2010 registered an increase of 19.0% year over year; and fell 3.3% over the previous month.

Franklin Resources' total equity assets at November end were approximately $276.0 billion, up from $249.0 billion at the end of November 2009, but down from $282.9 billion at the close of October 2010. Of the total equity assets, roughly 74% were from international sources while the rest 26% from the U.S.      

Fixed-Income assets were approximately $258.7 billion, up 42% from $182.2 billion in the year-ago quarter and down 1.0% from $261.2 billion in the previous quarter. Of the total, tax-free assets accounted for only 29%, while the rest 71% were taxable.

Hybrid assets plummeted 1.0% and 11.1% to $100.8 billion compared with $101.8 billion as of November 2010 and $77.7 billion as of October 2010, respectively. Cash Management's funds were approximately $6.8 billion, up slightly from $6.7 billion at the end of the year-ago month and flat from the previous quarter.

Franklin Resources is a global investment management company, deriving the majority of its revenue and net income from investment advisory and related services to retail mutual funds, institutional and private accounts and other investment products.

As of September 30, 2010, Franklin reported AUM of $644.9 billion, up from $523.4 billion at the end of a year-ago period and $570.5 billion as of June 30, 2010. Net new flows for the quarter ended September 30, 2010 were $19.4 billion, up from $12.2 billion in the year-ago quarter and $18.8 billion in the previous quarter.

Despite being well positioned with a diversified AUM and balance sheet, in our opinion, Franklin is not immune to the volatile economic environment at all; its revenues and AUM bear witness to its vulnerability. With the market reviving gradually, the company is expected to post better results in the quarters ahead.    

We currently maintain a Neutral recommendation on the stock.