Franklin Resources(BEN) - 2024 Q4 - Annual Report

PART I Forward-Looking Statements This section highlights that the Annual Report contains forward-looking statements, which are subject to known and unknown risks, uncertainties, and important factors that may cause actual results to differ materially from expectations - Forward-looking statements are provided under the 'safe harbor' protection of the Private Securities Litigation Reform Act of 1995[5] - Such statements involve known and unknown risks, uncertainties, and other important factors that may cause actual results to differ materially[6] - The Company undertakes no obligation to publicly announce changes to expectations or revisions to forward-looking statements, unless required by law[8] Item 1. Business Franklin Resources, Inc. is a global investment management organization operating under various brand names, with over $1.6 trillion in assets under management (AUM) as of September 30, 2024 - Franklin Resources, Inc. is a holding company with subsidiaries operating under Franklin Templeton® and/or subsidiary brand names, trading on the NYSE under 'BEN' and included in the S&P 500 Index[9] - The Company has one operating segment: investment management and related services[9] - As of September 30, 2024, the Company managed over $1.6 trillion in assets under management (AUM)[11] General Franklin offers diverse investment management and related services globally through various products and vehicles under distinct brand names - Franklin offers services and products under various distinct brand names, including Alcentra, Benefit Street Partners, Brandywine Global, Clarion Partners, ClearBridge Investments, Fiduciary Trust International, Franklin, Franklin Mutual Series, K2, Legg Mason, Lexington Partners, Martin Currie, O'Shaughnessy, Putnam, Royce, Templeton, and Western Asset Management Company[10] - The Company provides investment management and related services to retail, institutional, and high-net-worth investors globally through various products and vehicles, including sponsored funds, separate accounts, and sub-advised products[12] Company History Engaged in investment management since 1947, Franklin expanded through strategic acquisitions including Templeton, Legg Mason, Lexington Partners, Alcentra, and Putnam - Engaged in investment management since 1947, Franklin was incorporated in Delaware in 1969 and expanded through strategic acquisitions, including Templeton (1992), Legg Mason (2020), Lexington Partners (2022), Alcentra (2022), and Putnam (2024)[15] Our Business Structure Revenues and income are primarily derived from providing investment management and related services, with fees largely dependent on AUM levels and mix - Revenues and income are primarily derived from providing investment management and related services, with investment management fees largely dependent on the level and mix of AUM[16] Our AUM by Asset Class and Product Type The Company offers a broad product mix across equity, fixed income, alternative, multi-asset, and cash management asset classes - The Company offers a broad product mix across equity, fixed income, alternative, multi-asset, and cash management asset classes, delivered through U.S. funds, non-U.S. funds, institutional separate accounts, and retail separately managed accounts[19][20] AUM by Asset Class and Product Type (in billions) as of September 30, 2024 | (in billions) as of September 30, 2024 | U.S. Funds | Non-U.S. Funds | Institutional Separate Accounts | Separately Managed Accounts | Other | Total | Percentage of Total AUM | |:---------------------------------------|:-----------|:---------------|:--------------------------------|:----------------------------|:------|:--------|:--------------------------| | Equity | $ 359.1 | $ 101.9 | $ 60.7 | $ 94.4 | $ 16.0| $ 632.1 | 38 % | | Fixed Income | 179.1 | 63.9 | 251.3 | 34.1 | 28.0 | 556.4 | 33 % | | Alternative | 145.9 | 79.8 | 23.9 | 0.2 | 0.1 | 249.9 | 15 % | | Multi-Asset | 99.9 | 10.9 | 4.6 | 16.6 | 44.2 | 176.2 | 10 % | | Cash Management | 33.0 | 30.0 | 1.0 | — | — | 64.0 | 4 % | | Total | $ 817.0 | $ 286.5 | $ 341.5 | $ 145.3 | $ 88.3| $ 1,678.6 | 100 % | Our Investment Management Related Services and Products Specialist investment managers offer diverse expertise across asset classes and strategies, marketing products globally to retail, institutional, and high-net-worth clients - Specialist investment managers offer diverse expertise across asset classes and strategies, marketing products under their own brand names, with corporate distribution subsidiaries providing support[22] - Investment products are offered globally to retail, institutional, and high-net-worth clients, including mutual funds, closed-end funds, private funds, and separate accounts, designed for various investment goals including sustainable and ESG preferences[23] Our Funds Specialist investment managers manage fund portfolios, with most U.S. mutual fund investment management agreements requiring annual renewal and board or shareholder approval - Specialist investment managers manage fund portfolios according to stated objectives, with subsidiaries providing or arranging investment, shareholder servicing, and administrative services, often outsourcing to third parties[26] - Most U.S. mutual fund investment management agreements require annual renewal and approval by the board of directors or trustees, or shareholders, and are subject to termination with prior notice[27] Retail Separately Managed Account Programs Certain specialist investment managers provide services to retail separately managed account programs, offering clients various investment strategies with an all-inclusive fee - Certain specialist investment managers provide services to retail separately managed account programs, allowing clients to choose from various investment strategies with an all-inclusive fee covering asset management, allocation, custody, and administration[28] Alternative Products and Strategies Alternative products encompass a range of private credit, structured, private equity, and real estate funds, employing diverse investment strategies - Alternative products include private credit funds, structured products, business development companies, hedge funds, private equity funds, secondary funds, venture capital funds, and real estate funds, employing diverse investment strategies[29] High-Net-Worth Investment Management, Trust and Custody Services Through Fiduciary Trust International, the Company offers comprehensive services to high-net-worth individuals, families, family offices, foundations, and institutional clients - Through Fiduciary Trust International, the Company offers investment management, advisory, trust, custody, and related services to high-net-worth individuals, families, family offices, foundations, and institutional clients[30] Sales and Distribution The global distribution group manages sales, marketing, and business development through regional teams and various channels, with fees primarily from mutual fund distribution - The global distribution group manages sales, marketing, and business development through regional teams and various channels (retail, institutional, private wealth, retirement, insurance), leveraging a global footprint and investment capabilities[31] - Sales and distribution fees are primarily earned from distributing mutual funds, consisting of upfront sales commissions and ongoing distribution fees, which are largely paid to financial advisors and intermediaries[34][37] Shareholder Servicing Shareholder servicing fees are earned from sponsored funds for transfer agency services, determined by contractual margin or a percentage of AUM and account activity - Shareholder servicing fees are earned from sponsored funds for transfer agency services, including statements, transaction processing, client service, and tax reporting, determined by contractual margin or a percentage of AUM and account activity[39] Competition The financial services industry is highly competitive, with competition based on reputation, investment performance, product mix, service quality, innovation, distribution relationships, and fees - The financial services industry is highly competitive, with competition based on reputation, investment performance, product mix, service quality, innovation, distribution relationships, and fees[40] - The Company faces strong competition from numerous investment management companies, brokerage firms, banks, and other financial institutions, with increasing competition for third-party distribution channels leading to rising costs[40][44] Regulation The Company is subject to extensive and evolving U.S. federal and state, and international regulations, including securities, compliance, corporate governance, disclosure, privacy, anti-bribery, anti-money laundering, and sanctions laws - The Company is subject to extensive and evolving U.S. federal and state, and international regulations, including securities, compliance, corporate governance, disclosure, privacy, anti-bribery, anti