Franklin Resources targets $25B–$30B private market fundraising for 2026 while expanding digital and AI platforms

Earnings Call Insights: Franklin Resources, Inc. (BEN) Q4 2025

MANAGEMENT VIEW

* CEO Jennifer Johnson highlighted the transition of Adam Spector to CEO of Fiduciary Trust International and welcomed Daniel Gamba as Chief Commercial Officer and Co-President. Johnson stated, "Fiscal 2025 marked the first year of our 5-year plan, and we've made great strides across a number of key focus areas for the company. We are ahead of our plan for alternatives, ETFs and Canvas and on track in the other areas."
* Johnson emphasized Franklin’s leadership in alternatives with $270 billion in alternative AUM following the Apera acquisition, noting, "On October 1, we further strengthened our private debt platform through the acquisition of Apera Asset Management, bringing our private credit AUM to $95 billion and enhancing our reach across European markets."
* The CEO called out strong performance in ETFs and SMAs, with ETF AUM growing at a 75% compound annual rate since 2023 and record net inflows across key vehicles. "In our first year with approximately $50 billion in ETF AUM, we're already halfway to achieving our 5-year goal," said Johnson.
* Digital innovation was highlighted as a differentiator, with tokenized and digital AUM at $1.7 billion, up 75% from the beginning of the year. "We remain focused on investing in innovation and technology to harness blockchain's potential, redefining how investors access opportunities and shaping the future of asset management," said Johnson.
* CFO Matthew Nicholls stated, "For the fiscal fourth quarter, ending AUM reached $1.66 trillion, reflecting an increase of 3.1% from the prior quarter, and average AUM was $1.63 trillion, a 4.4% increase from the prior quarter. Adjusted operating revenues increased by 13.9% to $1.82 billion from the prior quarter due to elevated performance fees and higher average AUM."

OUTLOOK

* Johnson outlined a private market fundraising target for fiscal 2026, saying, "In fiscal 2026, we anticipate an increase to private market fundraising to between $25 billion and $30 billion."
* The company expects private wealth management fundraising contribution to grow to between 25% to 30% in the next few years.
* Nicholls provided fiscal first quarter 2026 guidance: "We expect our EFR to remain at mid-37 basis points for the quarter... We expect compensation and benefits to be approximately $880 million... G&A expense is expected to return to previous guide levels in the $190 million to $195 million range and includes elevated professional fees... we expect fiscal 2026 to be in the range of 26% to 28% due to a high proportion of U.S. income and the effect of increased tax rates globally."

FINANCIAL RESULTS

* Nicholls reported, "Adjusted operating income increased 25% from the prior quarter to $472.4 million, and adjusted operating margin increased to 26% from 23.7%. Fourth quarter adjusted net income and adjusted diluted earnings per share increased by 35.7% and 36.7% from the prior quarter to $357.5 million and $0.67, respectively."
* A $200 million noncash impairment charge was taken related to certain mutual fund contracts managed by Western Asset.
* For fiscal year 2025, ending AUM was $1.66 trillion, a 1% decrease from the prior year, while adjusted operating revenues were $6.7 billion, up 2.1% from the prior year. Adjusted operating expenses were $5.06 billion, an increase of 4.3% from the prior year.
* Nicholls stated, "We returned $930 million to shareholders through dividends and share repurchases, funded the majority of the remaining acquisition-related payments and repaid $400 million senior notes due March 2025 in the current year."

Q&A

* Alexander Blostein, Goldman Sachs: Asked about the private market fundraising target and the mix for Lexington’s flagship fund. Johnson responded, "The $25 billion to $30 billion will be a mix of Lexington. There will be contributions from Clarion on the real estate, BSP and Alcentra as well as Venture. Lexington could be half of that, but the others are intended to contribute significantly."
* Blostein also asked about expense cadence. Nicholls answered, "We guided earlier on in the year when markets were a lot lower that we'd be targeting $200 million of cost savings for 2026, which will be spread out through the year, and we're confident that we've achieved that."
* Benjamin Budish, Barclays: Inquired about infrastructure products. Johnson explained, "We're able to build a fund around participating in their [partners'] deals that will then distribute in the wealth channel... Infrastructure is an asset class that is particularly desired by people who are looking for income."
* William Katz, TD Cowen: Asked about AI and tokenization. Johnson stated, "We are the only ones who have -- and we built a transfer agency system and a wallet-based system because they didn't exist in the market... we can take like ETF and other products and tokenize them and list them on some of these exchanges."
* Brennan Hawken, BMO: Asked about Lexington flagship expectations. Johnson said, "I think their target is... about $25 billion for this fund. And I think the first close, they expect in the first half of 2026, calendar 2026."

SENTIMENT ANALYSIS

* Analysts focused on expense discipline, alternative fundraising targets, digital innovation, infrastructure, and the competitive positioning of tokenization and AI, showing a generally positive to slightly cautious tone, particularly around cost control and execution of growth initiatives.
* Management tone was confident and forward-looking in prepared remarks, emphasizing momentum in alternatives, ETFs, digital assets, and operational efficiency. During Q&A, leadership maintained clarity and composure, directly addressing questions about expenses, product pipeline, and market positioning.
* Compared to the previous quarter, analyst skepticism around Western Asset and digital initiatives has moderated, shifting more toward growth execution and scalability.

QUARTER-OVER-QUARTER COMPARISON

* The private market fundraising target for 2026 was raised to $25 billion–$30 billion from previous expectations of $13 billion–$20 billion for 2025.
* AUM rose from $1.61 trillion in Q3 to $1.66 trillion at quarter end.
* Expense guidance remains disciplined; management reiterated a $200 million cost savings target for 2026, consistent with previous commentary but now with greater confidence due to higher markets.
* Digital AUM growth and tokenization initiatives were given greater emphasis this quarter, while discussions about Western Asset’s challenges continued but with more focus on remediation and integration.
* Analyst tone shifted from probing around operational risks and digital ROI to more interest in execution and growth scalability.

RISKS AND CONCERNS

* Management addressed challenges in Western Asset, noting a $200 million impairment and efforts to integrate select corporate functions for efficiency.
* The fundraising environment for alternatives was described as more difficult, though Franklin’s scale was cited as an advantage.
* Expense management remains a key focus; management aims to self-fund growth initiatives through cost savings.
* Analysts questioned the impact of rising platform fees on ETF distribution and the pace of digital adoption; management indicated ongoing negotiations and a readiness to adapt.

FINAL TAKEAWAY

Franklin Resources, Inc. management highlighted robust progress in the first year of its 5-year plan, setting an ambitious private market fundraising target of $25 billion to $30 billion for fiscal 2026, continuing rapid growth in digital and ETF platforms, and reinforcing cost discipline with a $200 million savings goal. The company emphasized its leadership in tokenization, AI-driven solutions, and global distribution, aiming to capitalize on industry trends for scalable, diversified growth while addressing operational challenges and integrating recent acquisitions to drive long-term shareholder value.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/ben/earnings/transcripts]

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* Franklin Resources, Inc. (BEN) Q4 2025 Earnings Call Transcript [https://seekingalpha.com/article/4840468-franklin-resources-inc-ben-q4-2025-earnings-call-transcript]
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* Seeking Alpha’s Quant Rating on Franklin Resources [https://seekingalpha.com/symbol/BEN/ratings/quant-ratings]