Franklin Resources Inc (BEN) Q4 2025 Earnings Call Highlights: Strong Growth in AUM and Digital ...

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Ending AUM: $1.66 trillion, a 3.1% increase from the prior quarter. Average AUM: $1.63 trillion, a 4.4% increase from the prior quarter. Adjusted Operating Revenues: $1.82 billion, a 13.9% increase from the prior quarter. Adjusted Performance Fees: $177.9 million, up from $58.5 million in the prior quarter. Adjusted Operating Expenses: $1.34 billion, a 10.5% increase from the prior quarter. Adjusted Operating Income: $472.4 million, a 25% increase from the prior quarter. Adjusted Operating Margin: 26%, up from 23.7% in the prior quarter. Adjusted Net Income: $357.5 million, a 35.7% increase from the prior quarter. Adjusted Diluted Earnings Per Share: $0.67, a 36.7% increase from the prior quarter. Fiscal Year 2025 Adjusted Operating Revenues: $6.7 billion, a 2.1% increase from the prior year. Fiscal Year 2025 Adjusted Operating Expenses: $5.06 billion, a 4.3% increase from the prior year. Fiscal Year 2025 Adjusted Operating Income: $1.64 billion, a 4.3% decrease from the prior year. Fiscal Year 2025 Adjusted Operating Margin: 24.5%, down from 26.1% in the prior year. Fiscal Year 2025 Adjusted Net Income: $1.2 billion, a 6.3% decrease from the prior year. Fiscal Year 2025 Adjusted Diluted Earnings Per Share: $2.22, a 7.5% decrease from the prior year. Capital Returned to Shareholders: $930 million through dividends and share repurchases. Private Market Fundraising: $22.9 billion for fiscal 2025. ETF AUM Growth: 75% compound annual rate since 2023. Retail SMA AUM: $165 billion, with a 21% compound annual growth rate since 2023.

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Release Date: November 07, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Franklin Resources Inc (NYSE:BEN) was named 2025 Asset Manager of the Year in the $500 billion-plus AUM category by Money Management and Barron's, highlighting its leadership in innovation and investment advisory solutions. The company achieved strong growth in its ETF business, with a 75% compound annual growth rate since 2023 and 16 consecutive quarters of net inflows. Franklin Resources Inc (NYSE:BEN) reported a significant increase in private market fundraising, reaching $22.9 billion in fiscal 2025, ahead of its five-year $100 billion fundraising goal. The company has made substantial progress in its digital assets business, with tokenized and digital AUM reaching $1.7 billion, up 75% from the beginning of the year. Franklin Resources Inc (NYSE:BEN) has successfully integrated AI into its operations, enhancing productivity and efficiency across investment management, operations, sales, and marketing.

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Negative Points

The company experienced $122.7 billion in net outflows in fixed income, despite positive net flows into certain strategies like munis and stable value. Adjusted operating expenses increased by 10.5% from the prior quarter, primarily due to higher incentive compensation and performance fee-related expenses. Fiscal year 2025 adjusted operating margin decreased to 24.5% from 26.1% in the prior year, reflecting support for Western Asset Management. Franklin Resources Inc (NYSE:BEN) reported a $200 million non-cash charge related to the impairment of an indefinite-lived tangible asset managed by Western Asset. The company faces challenges in the fundraising environment, particularly in the secondary space, which is more difficult than historically.

Q & A Highlights

Q: Can you elaborate on the fundraising target for fiscal 2026, particularly regarding Lexington's flagship fund and the expansion of the retail alternatives lineup? A: Jennifer Johnson, CEO: The 2026 target is between $25 billion and $30 billion. Lexington could contribute significantly, potentially half of that, with the rest coming from Clarion, BSP, Alcentra, and venture. We expect a well-rounded contribution from all alternative managers in 2026.

Q: Could you provide more detail on the infrastructure side, particularly regarding new funds and current exposure? A: Jennifer Johnson, CEO: We see infrastructure as a massive category with significant funding needs. Our partnerships with DigitalBridge, Copenhagen Infrastructure Partners, and Actis allow us to build a fund for wealth channel distribution. Infrastructure is desired for income generation, and we aim to fill out our alternatives capability with this asset class.

Q: How do you view the opportunity for tokenization and its impact on performance, operating costs, and distribution? A: Jennifer Johnson, CEO: Tokenization is a programming language that offers efficiency and new capabilities. Our tokenized money market fund, approved by the SEC, allows for lower initial investments and daily yield payouts. This technology opens new distribution opportunities, such as partnerships with exchanges like Binance, and we expect all mutual funds and ETFs to be tokenized in the future.

Q: Can you update us on the Lexington flagship fund, including timing and size expectations? A: Jennifer Johnson, CEO: The fundraising environment is challenging, but there's significant opportunity in the secondary space. Lexington's target is about $25 billion, with the first close expected in the first half of calendar 2026.

Q: Could you discuss the credit quality in direct lending and the growth potential in Europe following recent acquisitions? A: Jennifer Johnson, CEO: We are not seeing a deterioration in credit quality and remain optimistic due to the strong economy. The Apera acquisition enhances our direct lending capabilities in Europe's lower middle market, complementing our existing private credit capabilities.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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