In public remarks following record investor outflows and an investigation by the Securities and Exchange Commission, Franklin Templeton CEO Jenny Johnson emphasized that the firm will remain commited to upholding its clients' interests.
Johnson sought to reassure investors after nearly $24 billion was pulled from its fixed-income subsidiary, Western Asset Management, in September, contributing to an unprecedented three-month total of $37 billion in withdrawals – the worst quarterly flows record in Franklin Templeton's history.
In an interview with CNBC, Johnson stated Franklin is cooperating fully with regulators and remains focused on “doing what’s right” for its clients.
“We’ve had an issue at Western which is isolated to an individual and a subset of strategies, but there’s definitely been outflows in those strategies,” Johnson acknowledged, emphasizing that Western still offers a range of unaffected fixed-income strategies and counts many loyal global clients. Western has been Franklin’s largest fixed-income unit, and news of the probe has sparked concern about its oversight of the subsidiary.
The SEC and Department of Justice investigation centers on allegations of "cherry-picking" trades at Western, where profitable trades were allegedly favored for select clients. Following these allegations, Western co-chief investment officer Ken Leech was placed on leave, prompting significant outflows and a 13 percent drop in Franklin’s stock.
Western, which Franklin acquired as part of its 2020 purchase of Legg Mason, was managing roughly $380 billion in assets at the time of the announcement, representing approximately 10 percent of Franklin’s overall revenue.
Johnson reiterated that Franklin Templeton is supporting unaffected client portfolios and bolstering its internal resources, especially for Western’s fixed-income management teams.
“The key is, and what clients want to know is, are their investment teams who are looking at it impacted by this,” Johnson explained. “And so we’ve been sure that they have the resources and that they’re continuing to manage and be supported and focused on what they’re doing every day.”
While Franklin Templeton expected to benefit from the Federal Reserve’s shift to lower interest rates, which has typically spurred demand for fixed-income products, rivals like BlackRock, Pimco, and JPMorgan have attracted inflows, according to the Financial Times. Some of Western’s major clients, including institutional and state pension funds, have reportedly begun transitioning their assets to other managers, seeking alternative bond investment providers amid the ongoing scrutiny.
For her part, Johnson maintained a posture of confidence, citing to her firm's different brands outside of Western and positive flows in other areas of its business.
"As a CEO, there are always times that you run into difficulties, and you have to stay focused on the longer-term picture, and on doing what’s right for your clients,” Johnson stressed.
Big-name defections from Morgan Stanley, UBS, and Merrill Lynch headline a busy two weeks of recruiting for the wirehouse.
Markets have always been unpredictable. What has changed is the amount of information investors are trying to process and the growing role advisors play in helping clients avoid emotional decisions
Six apartment deals, one "big account," and $2.7M in undocumented insider loans. Now the lawsuit lands
The Illinois order refers to Brandon Ellington’s investment program as a “Ponzi-like scheme.”
But the Amazon executive chair seems to want it both ways, arguing that taxing the ultra-wealthy won't help struggling Americans.
As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management
Growth may get the headlines, but in my experience, longevity is earned through structure, culture, and discipline
