Franklin Resources Q2 2025 slides: AUM falls to $1.54 trillion amid continued outflows

Franklin Resources, Inc. (NYSE:BEN) reported its second quarter 2025 financial results on May 2, revealing continued challenges with asset outflows and declining financial metrics, despite some bright spots in specialized investment products.

Executive Summary

Franklin Resources, the global investment management firm operating as Franklin Templeton, saw its assets under management (AUM) decline to $1.54 trillion in Q2 2025, down from $1.58 trillion in the previous quarter and $1.64 trillion in the same quarter last year. The company reported adjusted earnings per share of $0.47, a significant drop from $0.59 in Q1 2025 and $0.56 in Q2 2024.

Despite the overall challenges, the company highlighted several positive developments, including $6.8 billion in alternative asset fundraising, $4.1 billion in ETF net flows, and record retail separately managed account (SMA) inflows of $3.2 billion.

As shown in the following business highlights chart, the company maintained solid investment performance with over half of its mutual fund and strategy composite AUM outperforming peer medians and benchmarks across various time periods:

Quarterly Performance Highlights

Franklin Resources reported adjusted revenue of $1.61 billion for Q2 2025, representing a decrease from both the previous quarter’s $1.68 billion and the year-ago quarter’s $1.67 billion. Adjusted operating income also declined to $377.2 million from $412.8 million in Q1 2025 and $419.6 million in Q2 2024.

The company’s adjusted effective fee rate showed some improvement at 38.3 basis points, up from 37.2 basis points in the previous quarter but still below the 38.5 basis points recorded in Q2 2024.

The following financial summary illustrates the quarter-over-quarter and year-over-year comparisons across key metrics:

Long-term net outflows remained a challenge at $26.2 billion for the quarter. However, the company noted that long-term inflows increased by 9% excluding reinvested distributions, and the institutional pipeline of won but unfunded mandates grew to $20.4 billion, potentially setting the stage for future inflows.

The following chart details the AUM and flows trends over recent quarters:

Detailed Financial Analysis

Breaking down performance by asset class reveals varying results across Franklin’s investment categories. The equity segment, which represents 40% of total AUM at $598 billion, experienced net outflows of $5.4 billion in the quarter. Fixed income, accounting for 29% of AUM at $446 billion, faced more significant challenges with net outflows of $30.5 billion.

The following chart illustrates the flows by equity and fixed income asset classes:

Meanwhile, the alternatives segment, representing 16% of AUM at $252 billion, showed more resilience with inflows of $6.4 billion against outflows of $2.1 billion. The multi-asset category, which makes up 11% of AUM at $176 billion, recorded inflows of $3.3 billion against outflows of $9.6 billion.

The following chart shows the flow dynamics in the alternatives and multi-asset categories:

On the expense side, the company reported adjusted operating expenses that have impacted overall profitability, contributing to the decline in adjusted operating income and earnings per share.

The following chart provides a detailed view of the financial results:

Strategic Initiatives and Business Diversification

Franklin Resources continues to maintain a diversified business model across asset classes, client types, and geographic regions. This diversification strategy appears designed to provide resilience amid challenging market conditions.

As illustrated in the following chart, the company’s AUM is distributed across equity (40%), fixed income (29%), alternatives (16%), multi-asset (11%), and cash (4%). From a client perspective, retail investors account for 55% of AUM, institutional clients represent 42%, and high-net-worth individuals make up 3%. Geographically, the U.S. remains the dominant market at 70%, followed by EMEA (13%), APAC (10%), and the Americas (7%):

The company’s focus on growing its alternatives business aligns with the strategy outlined in previous communications, where management had indicated plans to raise $100 billion in private markets over a five-year period. The $6.8 billion raised in alternatives this quarter represents progress toward that goal.

Similarly, the strong ETF flows of $4.1 billion and record SMA inflows of $3.2 billion suggest that Franklin’s efforts to expand in these growing market segments are gaining traction, despite the overall outflow challenges.

Investment Performance and Future Outlook

Investment performance remains a critical factor for future growth and retention of assets. Franklin Resources reported that over half of its mutual fund and strategy composite AUM is outperforming peer medians and benchmarks across various time periods.

The following chart details the percentage of AUM above peer median and benchmark across different time horizons:

For mutual funds versus peers, performance improved with longer time horizons, with 58% outperforming over one year, 55% over three years, 60% over five years, and 63% over ten years. Strategy composites versus benchmarks showed a similar pattern with 43%, 56%, 56%, and 52% outperformance across the same time periods, respectively.

Looking ahead, Franklin Resources faces the challenge of reversing the trend of net outflows while continuing to build on its strengths in alternatives, ETFs, and SMAs. The growth in the institutional pipeline to $20.4 billion provides a potential source of future inflows, though execution will be key to converting these opportunities.

The company’s current stock price of $18.74 reflects these mixed results, trading well below its 52-week high of $24.86 but above its 52-week low of $16.25. Investors will likely be watching closely for signs that the company can stabilize AUM and return to growth in adjusted revenue and earnings in coming quarters.

Full presentation:

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