Q1 2022 Franklin Resources Inc Earnings Call
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Welcome to Franklin Resources earnings Conference call for the quarter ended December 31st 2021.
Speaker 1: Welcome to Franklin Resources' earnings conference call for the quarter-ended December 31, 2021. Hello, my name is April .
Hello, My name is April and I will be your operator today as a reminder, this conference is being recorded and at this time all participants are in a listen only mode.
Speaker 1: As a reminder, this conference is being recorded and at this time all participants are in a listen-only mode.
Speaker 1: I would now like to turn the conference over to your host, Celine O. Head of Investor Relations for Franklin Resources.
I would now like to turn the conference over to your host.
<unk> head of Investor Relations for Franklin resources.
May begin.
Speaker 2: Good morning and thank you for joining us today to discuss your quarterly results.
Good morning, and thank you for joining us today to discuss our quarterly results.
<unk> made on this conference call regarding Franklin Resources, Inc.
Speaker 2: Statements made on this conference call regarding Franklin Resources, Inc., which are not historical facts or forward-looking statements, was in the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a number of known and unknown risks, uncertainties, and other important factors that could cause actual results to differ materially from any future results expressed or implied by such forward-looking statements.
Which are not historical facts are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995. These forward looking statements involve a number of known and unknown risks uncertainties and other important factors that could cause actual results to differ materially from any future results expressed or implied by such forward looking.
These and other risks uncertainties and other important factors that I just described in more detail and frankly recent filings with the Securities and Exchange Commission, including in the risk factors and the MD&A sections of Franklin's. Most recent Form 10-K , and 10-Q filings now I'd like to turn the call over to Jenny John's.
Speaker 2: These and other risks, uncertainties and other important factors are just described in more detail in Franklin's recent filings with the Securities and Exchange Commission, including in the risk factors and the MDNA sections of Franklin's most recent form 10K and 10Q filings. Now, I'd like to turn the call over to Jenny Johnson, our President and Chief Executive Officer. Thank you.
Our president and Chief Executive Officer, Thank you Felipe.
Speaker 3: Hello, everyone, and thank you for joining us today to discuss Franklin Templeton's results for our first fiscal quarter. Matthew Nichols, our CFO , and Adam Spector, our Head of Global Distribution, are on the call with me today.
Hello, everyone and thank you for joining us today to discuss Franklin Templeton's results for our first fiscal quarter, Matthew Nicholls, our CFO and Adam Spector, our head of global distribution are on the call with me today.
Speaker 3: 2022 marks Franklin Templeton's 75th anniversary of the company, a proud milestone to be sure. And although much has changed in that time span, our commitment to progress for the benefits of our shareholders, clients, and employees has not.
2022 Marc Franklin Templeton, 75th anniversary as a company.
Proud milestone to be sure and although much has changed in that time span our commitment to progress for the benefits of our shareholders clients and employees is not.
Speaker 3: After enjoying a strong run since the pandemic lows, global equity markets in 2022 have had a volatile start to the year. Navigating this environment reminds us of the value of active management and the importance of a resilient organization.
Enjoying a strong run since the pandemic woes global equity markets in 2022 have had a volatile start to the year.
Navigating this environment reminds us of the value of active management and the importance of a resilient organization.
Throughout our history, we've worked to build a diversified business across asset classes client types regions and investment vehicles.
Speaker 3: Throughout our history, we have worked to build a diversified business across asset classes, client types, regions, and investment vehicles. In recent years, we've further diversified our firm to be well positioned to offer our clients a full range of investment solutions.
In recent years, we further diversified our firm to be well positioned to offer our clients a full range of investment solutions.
Speaker 3: Over the course of the past quarter, we've continued to make acquisitions and add resources in key areas driving industry growth such as alternatives, SMAs and wealth management, as well as ESG and sustainable investing.
Over the course of the past quarter, we've continued to make acquisitions and add resources in key areas driving industry growth, such as alternatives, Sma's and wealth management as well as ESG and sustainable investing.
As we look to the future our strong balance sheet provides us with financial flexibility and positions us well across market cycles.
Speaker 3: As we look to the future, our strong balance sheet provides us with financial flexibility and positions us well across market cycles.
Speaker 3: Importantly, despite current market conditions, we have the resources to remain focused on executing on our long-term strategic priorities. Turning now to our first
Accordingly, despite current market conditions, we have the resources to remain focused on executing on our long term strategic priorities.
Turning now to our first fiscal quarter results.
Speaker 3: Long-term net flows of $24.1 billion were the third highest in company history and marked the first positive quarter since December 2014.
Long term net flows of $24 1 billion or the third highest in company history and marked the first positive quarter since December 2014.
Speaker 3: This compares to long-term net outflows of $9.9 billion in the prior quarter and $4.5 billion of outflows in the prior year quarter.
This compares to long term net outflows of $9 9 billion in the prior quarter and $4 5 billion of outflows in the prior year quarter.
Speaker 3: All asset classes saw improved long-term net inflows for the quarter and Alternatives posted a 10th consecutive quarter of net long-term inflows with $3 billion.
All asset classes saw improved long term net inflows for the quarter and alternatives posted a 10th consecutive quarter of net long term inflows with $3 billion.
Speaker 3: Reinvested distributions, which are typically higher in the first quarter, were elevated at $23.5 billion compared to $12.6 billion in first quarter of 2021.
Reinvested distributions, which are typically higher in the first quarter were elevated at $23 5 billion compared to $12 6 billion in first quarter of 2021.
However, including or excluding reinvested dividends and the newly won mandates from a new investment team, we made progress in all asset classes.
Speaker 3: However, including or excluding reinvested dividends and the newly won mandates from a new investment team, we made progress in all asset classes.
Speaker 3: We remain focused on evolving our global distribution efforts and the improvements we have made are driving growth. We have prioritized our focus on our largest markets and clients which has led to positive long-term net flows in the U.S. and our EMEA region. We're deepening relationships and are positioned for continued sales momentum as we focus on cross-selling across all regions.
We remain focused on evolving our global distribution efforts and the improvements we have made are driving growth.
We have prioritized our focus on our largest markets and clients, which has led to positive long term net flows in the U S. In our EMEA region.
Deepening relationships and are positioned for continued sales momentum as we focus on cross selling across all regions.
Speaker 3: Investment performance was strong across all periods with 61 percent, 70 percent, 71 percent, and 77 percent of our strategy composites outperforming their respective benchmarks on a one, three, five, and ten-year basis.
Performance was strong across all periods with 61%, 70%, 71% and 77% of our strategy composite outperforming their respective benchmarks on a 135 and 10 year basis.
Speaker 3: For the quarter, 54% of our mutual fund AUM were in funds rated four or five star by Morningstar compared to 41% a year ago. Absence under management increased 3% during the quarter to 1.58 trillion, and that's an increase of 5% compared to the same quarter a year ago, or 8% based upon average AUM.
Quarter, 54% of our mutual fund AUM were in funds rated four or five star by Morningstar compared to 41% a year ago.
Assets under management increased 3% during the quarter to 158 trillion and that's an increase of 5% compared to the same quarter, a year ago or 8% based upon the average AUM.
Speaker 3: The financial results from our business continue to improve. Adjusted operating income increased by 6% to $686 million quarter over quarter and was 25% higher than last year at this time.
The financial results from our business continued to improve adjusted operating income increased by 6% to $686 million quarter over quarter and was 25% higher than last year at this time.
Speaker 3: As mentioned earlier, we believe that we are well-positioned to capitalize on a number of important trends influencing our industry. Let's start with alternative asset management.
As mentioned earlier, we believe that we're well positioned to capitalize on a number of important trends influencing our industry.
Let's start with alternative asset management.
Speaker 3: Alternatives represent an increasing share of the asset management industry and a key strategic priority for Franklin Templeton.
It is representing an increasing share of the asset management industry and a key strategic priority for Franklin Templeton.
Speaker 3: For the most recent quarter, our alternative assets under management grew 6% from the prior quarter to $154.3 billion and by 21% from the prior year period.
For the most recent quarter, our alternative assets under management grew 6% from the prior quarter to $154 3 billion and by 21% from the prior year period.
Speaker 3: With our announcement to acquire Lexington Partners, we now have leading specialist investment managers in key alternative asset categories.
With our announcement to acquire Lexington partners, we now have leading specialist investment managers and key alternative asset categories.
Speaker 3: When the transaction closes, our pro forma alternative assets under management are expected to be approximately $200 billion.
When the transaction closes our pro forma alternative assets under management are expected to be approximately 200 billion.
To further develop our alternative asset efforts. This quarter. We also made strategic investments in north capital in early stage private securities market platform and case, a market leader in providing retail investors and their advisors access to alternative investments.
Speaker 3: To further develop our alternative asset efforts, this quarter we also made strategic investments in North Capital, an early stage private securities market platform, and CASE, a market leader in providing retail investors and their advisors access to alternative investments.
Speaker 3: Another important area is SMAs, given their higher relative growth rates versus other retail products.
Another important area is SMA, given their higher relative growth rates versus other retail products are.
Speaker 3: our SMA business grew 8% from the prior quarter to a record $135.7 billion in AUM and by 20% from the prior year quarter.
Our SMA business grew 8% from the prior quarter to a record $135 7 billion in EQM and by 20% from the prior year quarter.
As part of our strategic initiative to bring sophisticated customization to a larger segment of investors our acquisition of <unk> asset management, which closed on December 31.
Speaker 3: As part of our strategic initiative to bring sophisticated customization to a larger segment of investors, our acquisition of O'Shaughnessy Asset Management, which closed on December 31st, enhances our ability to deliver individualized SMA solutions as we continue to advance the broader evolution of managed accounts.
Here is our ability to deliver individualized SMA solutions as we continue to advance the broader evolution of managed accounts.
Speaker 3: Canvas, our custom indexing solution, has doubled its assets in the past year to over $2 billion. Additionally, the number of partner firms have increased threefold since the announcement.
Our custom indexing solution has doubled its assets in the past year to over 2 billion. Additionally, the number of partner firms have increased threefold since your announcement.
Investors are more focused on ESG and sustainable investing than ever.
Speaker 3: Investors are more focused on ESG and sustainable investing than ever, and we aim to provide a range of investment solutions to meet their highly personalized goals and objectives.
We aim to provide a range of investment solutions to meet their highly personalized goals and objectives.
Speaker 3: We're committed to investing in the expertise, resources, and tools to develop our leadership position in this critical area.
We're committed to investing in the expertise resources and tools to develop our leadership position in this critical area.
Speaker 3: In this context, we're excited to recently announce Anne Simpson as our global head of sustainability, a newly created role charged with driving Franklin Templeton's overall strategic direction of stewardship, sustainability, and ESG investment strategy globally.
In this context, we are excited to recently announce and Simpson as our global head of sustainability, a newly created role charged with driving Franklin Templeton overall strategic direction on stewardship sustainability and ESG investment strategy globally.
Speaker 3: Anne brings an extensive background with experience in public pension plans, academia, and the international regulatory and policy arena. We've made important strides in this area in recent years, and Anne's expertise and leadership will help take our firm-wide efforts to the next level.
And brings an extensive background with experience in public pension plan academia, and the international regulatory and policy Arena.
We've made important strides in this area in recent years and an expertise and leadership will help take our firm wide efforts to the next level.
Speaker 3: Another strategic development that occurred during the quarter was our agreement with FIS to assume operation of our global transfer agent through a phased transition over the coming year.
Another strategic developments that occurred during the quarter was our agreement with Fas to assume operation of our global transfer agent for a phased transition over the coming here.
Speaker 3: The combination of leading technology built by both companies will form a unique global TA offering that will deliver an enhanced service experience. Importantly, the move to a single transfer agent platform will allow fund shareholders and financial professionals the ability to purchase and exchange all of our funds with greater ease.
Combination of leading technology built by both companies will form a unique global tea offering that will deliver an enhanced service experience importantly, the move to a single transfer agent platform rollout fund shareholders and financial professionals the ability to purchase an exchange all of her.
With greater ease.
Speaker 3: This changes a natural evolution of our business and follows our successful efforts to strategically partner with industry-leading firms for functions, including fund administration and application technology.
This change is a natural evolution of our business and follows our successful efforts to strategically partner with industry, leading firms for functions, including fund administration and application technology.
Stepping back and reflecting on our overall efforts the past several years as we brought together a world class specialists investment managers Franklin Templeton has a different business today we've.
Speaker 3: stepping back and reflecting on our overall efforts the past several years as we've brought together a world class specialist investment managers. Franklin Templeton is a different business today. We've made significant progress. And yet, as I've said on the previous calls, in so many ways, we're just getting started.
We've made significant progress and yet as I said on the previous calls in so many ways. We're just getting started.
That's why in January we announced the launch of our global advertising campaign, Hello, progress, which reintroduced the Franklin Templeton brand and our bodies are a relentless focus on innovation and the belief that every change creates an opportunity to better meet client needs.
Speaker 3: That's why, in January , we announced the launch of our global advertising campaign, Hello Progress, which reintroduced the Franklin Templeton brand and embodies our relentless focus on innovation and the belief that every change creates an opportunity to better meet client needs.
Speaker 3: We have a new story to tell. We've built a stronger and more vibrant company. We now offer more boutique specialization on a global scale. Our clients have access to the specialist and expertise they need while enjoying the confidence that comes with working with a firm of our size.
We have a new story to tell.
Built a stronger and more vibrant company, we now offer more boutiques specialization on a global scale, our clients have access to the specialist expertise they need while enjoying the confidence that comes with working with a firm of our size let.
Speaker 3: Let me wrap up by saying that none of our accomplishments would be possible if it weren't for our dedicated employees. I'd like to thank them for their ongoing focus on the client, which has helped our business to thrive for the last 75 years and positions us well for the next 75. And now we'd like to open the call up to your questions, operator.
Let me wrap up by saying that none of her accomplishments would be possible. If it worked for our dedicated employees.
I'd like to thank them for their ongoing focus on the client, which has helped our business to thrive for the last 75 years positions us well for the next 75.
And now we'd like to open the call up to your questions operator.
Thank you if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question Keith if anyone should require operator assistance during the call. Please press star zero on your telephone keypad.
Speaker 1: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. If anyone
Speaker 1: We request that you limit to one question and one follow-up.
We request that you limit to one question and one follow up question.
And our first question is from Craig Siegenthaler with Bank of America.
Speaker 1: And our first question is from Craig Siegenthaler with Bank of America.
Speaker 4: Good morning, Jenny, Matt. Hope you're both doing well and congrats on the positive NetFlow inflection.
Good morning, Jennie, Matt Hope, you're both doing well and congrats on the positive net flow inflection.
Good morning, Thank you.
Speaker 4: So my question is on your strategic initiative and the estimate that.
So my question is on your strategic initiatives and the estimate business now that you have o'shaughnessy direct indexing platform canvas, which really complements the leading business you got from Legg Mason on the SMA side I wanted to get an update on your overall estimate strategy and specifically with <unk>.
Speaker 4: Now that you have O'Shaughnessy's direct indexing platform Canvas, which really complements the leading business you got from Lake Mason on the SMA side, I wanted to get an update on your overall SMA strategy and specifically, which client verticals do you see the biggest opportunities? Because I'm assuming RIA is probably a big one. And then also, what Franklin SMA products specifically do you think are going to have the best NetFlow trajectory?
<unk> verticals do you see the biggest opportunities because im assuming <unk>, probably a big one and then also what Franklin estimate product specifically do you think are going to have the best net flow trajectory here.
Well first off I'll start out and then have Adam jump in you know I mean.
Speaker 3: I'll start out and then have Adam jump in. You know, I mean, I think we all feel like with what technology is enabling is just much greater cut.
Thank you.
We all feel like with what technology is enabling.
He is just much greater customization.
Speaker 3: And so while something like Canvas is fantastic for direct indexing, we really do think that its capabilities merged with our SMA platform, you'll be able to take active strategies and make them more tax efficient.
And so while something like you know.
This is fantastic for direct indexing, we really do think that it its capabilities merged with our SMA platform, you'll be able to take active strategies and make them more tax efficient.
Speaker 3: As a matter of fact, Canvas has been growing that platform while on a small base on the direct indexing side has grown almost twice the industry just since we even announced it. And it's really driven because they have an outstanding technology platform that enables them to take it really in what many of the platforms have with a lot of – are handling manually. They've actually been able to program.
Matter of fact, Kansas has been growing that platform ball on a small base from the direct indexing side.
<unk> grown almost twice the industry just since we even announced it.
And it's really driven because they have outstanding technology platform.
That enables them to you.
To take it really in what many of the platforms have with a lot of book.
You know our handling manually they've actually been able to program it.
Speaker 3: So, we think that the future SMAs just continue to grow, and honestly, that it's across the board, I think, in all channels, but some are already more comfortable with it than others. And Adam, you want to talk a little bit more about that?
So we think that the future estimates just continued to grow and honestly that it's it's across the board I think in all channels, but some are already more comfortable with it than others and Adam do you want to do you want to talk a little bit more about that.
Sure.
I'm, making sure I'm not on mute here I would say that.
Speaker 5: I'm not on mute here. I would say that
The growth is really differentiated depending on if we're talking about canvas or our more traditional SMA business. The traditional SMA business was really strongest at the wires, because that's where legg Mason at its traditional strength, we've been really pleased over the last years.
Speaker 5: the growth is really differentiated, depending on if we're talking about Canvas or our more traditional SMA business. The traditional SMA business was really strongest at the wires because that's where Lake Mason had its traditional strength.
Speaker 5: We've been really pleased over the last year at the significant cross-selling.
Last year at the significant cross selling such that we now see real growth.
Speaker 5: such that we now see real growth in SMA and our regional partners, as well as with legacy FT products, FT fixed income, some of the equity products there as well. So we're getting more product breadth there, and we're also spreading out of the wires. In terms of.
SMA in our regional partners as well as.
With legacy FTE products ft fixed income Muni some of the equity products there as well so we're getting more product breadth there and we're also spreading out of the wires in terms of canvas.
Speaker 5: We've already essentially tripled the number of RIAs that are using that platform.
We've already essentially tripled the number of <unk> that are using that platform.
Speaker 5: They are really focused on that platform and we think for Canvas we need to continue to grow the platform in that area. At the same time, we're working to expand into newer areas like the traditional broker-dealer market for Canvas where we think we can use
They are really focused on that platform and we think for canvas, we need to continue to grow the platform in that area at the same time, we're working to expand into newer areas like the traditional broker dealer market for canvas, where we think we can use.
Speaker 5: use it more to create investment products as opposed to it serving as an entire platform in the broker-dealer world. So that cross-selling strategy is really what's key for us. We want to move in both directions and we're seeing that. There's not really one product or one asset class that I would say you'll see the most growth in. What we're actually pleased about is the breadth we've been able to achieve in the SMA growth over the last
Use it more to create investment products as opposed to it's serving as an entire platform and the broker dealer world. So that cross selling strategy is really whats key for US we want to move in both directions, and we're seeing that there's not really one.
Product or one asset class that I would say, you'll see the most growth than what we're actually pleased about is the breadth we have been able to achieve in the SMA growth over the last year.
Thank you Jenny and Adam I, just have one follow up for Matt more of an accounting type question, but I know you guys include your realizations.
Speaker 4: Thank you, Jenny and Adam. I just have one follow up for Matt, more of an accounting type question, but I know you guys include your realizations in the AUM role forward in market appreciation or beta. At this point, because you're much bigger in all, it's much bigger in private markets and you just did the Lexington acquisition, why not in the future break out realizations separately? Because I think it would help us from our modeling side, I think.
AUM roll forward and market appreciation of beta.
At this point because you are much bigger in all its much bigger in private markets and you just did the Lexington acquisition why not in this future breakout realizations separately.
I think it would help us from a modeling side of things.
Yeah.
Speaker 6: Yeah. Good morning, Craig. We may do that, I'd say, in the next 12 months as we continue to assess the breadth of our alternative asset business. Out of the $140 million of performance fees that we just reported, $30 million was realizations.
Good morning, Craig we may do that.
I'd say in the next 12 months as we continue to assess the breath of our alternative asset business out of the $140 million of performance fees that we just reported.
$30 million was realizations.
Speaker 6: uh... you know i think i think the size of our performance fees reflects the potential uh... of our larger alternatives business obviously this excludes lexington at this stage
I think I think the size of our performance fees reflects the potential.
Our larger alternatives business, obviously this excludes Lexington at this stage.
Speaker 6: The December quarter is probably the highest performance.
The December quarter.
Probably the highest performance.
Speaker 6: the quarter that we'll have because it's the quarter where we have both realizations.
The quarter that will have because it's the quarter, where we have both.
Realizations.
Speaker 6: courtly performance fees and annual performance fees.
Italy performance fees and annual performance fees.
Speaker 6: I'll also note that out of the 140, about 40 of that was specifically annual related.
I would also note that out of the 140.
<unk> 40 of that was specifically.
Related.
Speaker 6: The rest is actually pretty hard to quantify accurately in our view from a guidance perspective.
The rest is actually pretty hard to quantify accurately in our view from a guidance perspective.
Speaker 6: but we are going to increase our guidance on performance fees from 10 to 15 million.
But we are we all going to increase our guidance some performance fees from $10 million to $15 million.
Speaker 6: uh... which is where we were on the guidance fronts to uh... thirty to forty million uh... for the second quarter so
Which is where we were in the guidance fronts to.
$30 million to $40 million.
For the second quarter so.
I know that's a longer answer to your question correct, but we're going to study. This further to see if we can provide more granular information to be useful to modeling. It is very difficult. The performance fees are very broad and very different categories.
But we will do our best to provide better guidance, where we can.
Thank you, Matt and just to highlight my question was a little more on the AUM realisation side of things and the performance fee revenue side of things, but I heard your response that you guys are looking into it. So thank you for taking my questions got you. Okay got you. Thank you very much.
Speaker 4: Thank you, Matt. And just to highlight, my question was a little more on the AUM realization side of things and the performance-to-revenue side of things. But I heard your response that you guys are looking into it. So thank you for taking my questions. Okay, gotcha. Thank you very much.
Speaker 1: Your next question is from Alex Blasdien with Goldman Sachs.
Your next question is from Alex Blaustein with Goldman Sachs.
Hey, good morning, everybody. Thanks for the question.
Speaker 5: Hey, good morning, everybody. Thanks for the question. I wanted to start with the alts business for a couple of minutes. I think on the last call you talked about, I think about a billion dollars in management fees or maybe total revenues that the performer business would generate, I guess, performer flexing. I think that was the number. How are you guys thinking about the organic growth on that billion dollars or so in revenues? What sort of the organic basic growth do you expect the collection of these businesses could produce for Franklin over time?
I wanted to start with the old <unk> business for a couple of minutes I think on the last call.
You talked about I think about $1 billion in management fees or maybe total revenues that the pro forma business would generate I guess pro forma collection I think that was the number.
How are you guys thinking about the organic growth on that $1 billion or so in revenues, what sort of the organic base fee growth that you expect the collection of these businesses could produce for Franklin overtime.
Speaker 6: Yes, thank you, Jenny. Morning Alex.
Yes.
Yes, Thank you Jenny good morning, Alex.
Yes.
Speaker 6: You know, I think candidly that the billion dollars per former for Lexington is probably already fairly conservative. We would hope that that would be close to 1.2 to 1.3 billion post closing.
I think candidly that the $1 billion pro forma for Lexington is probably already fairly conservative we would hope that that would be close to one two to $1 3 billion.
Closing the 12 months thereafter, plus.
Speaker 6: for 12 months thereafter, plus performance fees. So, you know, we've been growing the business over the last couple of years at a growth rate of about 20%. I think I've mentioned in the past that about half of that is organic. The other half is through market growth.
Plus performance fees so.
We've been growing the business over the last couple of years that at.
Our growth rate of about 20% I think I've mentioned, the past that about half of that is organic the other half is through market growth.
Speaker 6: So I think we'd say, you know, minimum of 10%, but in our view, it should be between 10% and 20% with respect to the growth rate for our combined.
So I think we'd say at a minimum of 10%, but in our view should be between 10 and 20% with respect to the.
Growth rate throughout combined alternatives business.
Great. That's helpful. Thank you and then.
Just maybe in terms of guidance I heard you talk about performance fees for the second quarter.
If there is any other guidance guidance things you want to flesh out related to expenses, maybe that would be helpful. As well just kind of how you're thinking about.
Standalone Franklin pre Lexington expense base for the rest of the fiscal year.
Yes, okay. So there's a few parts of this Trump is as useful as possible obviously, it's not easy in the current volatile.
Volatile market to get this exactly right.
I'm going to spend most of my time talking about the annual number and then we can go from that so the first point I'd make.
First quarter that we just reported today includes $15 million of one time benefit to G&A.
I think most of you pointed that out already so that's good.
And the second quarter includes the restart of calendar year comp costs, such as annual Merit increases payroll taxes, 401k match et cetera. However, we expect our comp ratio to remain in the 43% to 44% area inclusive of performance fee compensation.
And then I would note that 35% to 40% of our total expense base is variable with markets and performance.
And as we've mentioned beforehand, we are consistently reviewing the other 60% to 65% in terms of long term potential operational efficiencies. So what this all means at this point inclusive of the market that we've experienced over the last few weeks is that we still expect our full year 'twenty two operating expenses to be in the range of three.
9% to $3 95 billion, excluding performance fees and excluding Lexington.
Very helpful. Thanks, so much.
Thank you Alex.
Your next question is from Bill Katz with Citigroup.
Okay. Thank you very much for taking my questions as well.
Can you maybe one for you in your supplement with management commentary that came out also at the same time as the press release, you spoke to some pretty good breadth in the retail alternative space I was wondering if you could talk a little bit more strategically how are you sort of see the opportunity.
For so we'll take advantage of the democratization opportunity maybe U S. Non U S. And then the converse is is a franchise like Wabco disintermediation just gave its more traditional fixed income portfolio.
Yeah. Thanks, Bill So first of all I can tell you. This is a passion within Franklin.
Because of the excess returns that youre seeing in the private markets. If you think about a company with Franklin's history that started out because the average person couldn't access the equity markets.
And people came up with the idea, let's consolidate so that the masses can get access to the excess returns in equity markets well that same thing exists today. There are half the number of public equity you said there were in 2000 and there are five times the number of backed private firms equity firms.
Then there were in 2000 and the differential so first of all from an active management.
The disparity in returns between good.
Managers and bad managers is dramatic and number two there the returns over the public markets or Cigna again, right. So we've got to figure out as a society. We feel are calling to figure out how to bring these types of products responsibly.
Hit the mass market and so when I say responsibly.
They're running with scissors kind of scenario where.
The average investor needs access to their money.
And their savings because of a single event that happens in their life and so that they are tied up in our long term.
Private assets that can be a problem. So we think there's interesting way to do that and so when you ask well what's the market opportunity just take the four largest wire houses in the U S.
About 13 trillion in assets.
Somewhere depending on the firm on average 4% to 5% in the Alt space, 1% increased by just those four wire houses and we've talked to them they'd like to increase your allocations somewhere between 10, and 12% is $130 billion.
Added to the private markets.
So.
We think that.
Everybody feels.
We've talked to recognize the need to be able to do recognize the need to be able to come up with appropriate products.
To bring you to that channel and the same phenomenon that exists in the U S exists in other markets with those disparity of returns.
So we think that the to answer your question, we think it's very very big.
And I would just add.
Sorry, Jerry I would just add one thing is that in terms of western being dis intermediate dose.
Just remember that they've got really strong alternative product on their own very strong in the CLO space Theyre global macro opportunities fund is very strong.
So not a concern there that's the only thing I would add.
Okay. Thank you for the follow up then.
I'm going to just add one other thing this is actually where we think it could be interesting.
We're looking at product development, where you provide.
BSP private credit, although we have some private credit private credit combined as an allocation within say closed end fund with western So I mean, this is where we think that having the breadth of capabilities really can bring some interesting products to the to the to the retail market.
Okay. Thank you I'm, sorry to cut you off both twice there just.
Follow up question, maybe for Matt just thank you for the updated annual guidance on expenses could you just sort of elaborate on what your market assumptions are and as you think about those performance fees is that first.
Calendar quarter guidance now sort of a normal quarterly run rate. Thank you.
Yes.
The performance fee guidance that was really just for the second quarter Bill, but again, we're going to try our best to provide additional guidance as we roll through the year as our alternative asset business continues to expand we do expect a performance fee potential to continue to increase so that's that piece in terms of the market.
Assumption.
Hi.
It took into account in the guidance there for the year the market assets.
A few days ago when the <unk>.
The market was down.
Double digits for the NASDAQ and pretty close to that for the S&P 500, and certainly the Russell 2000, and for example in the fixed income indices down a little bit less.
But one of the things I will note on the top line, while we don't provide revenue guidance.
For the business when markets decline, particularly very obviously very aware of this but when the market's decline our revenue declines a lot less than the market.
And that's because we've diversified the business so significantly over the past several years in particular and as that walks business becomes larger.
Other sticky businesses like wealth part CSMA franchise now.
And some of the institutional business that is.
Much more sticky and less.
Less prone to sharp market declines on the revenue front so.
That's how I'd address that question without giving any more.
Guidance on the revenue side, though okay.
Okay. Thank you for the color and thank you for all the questions.
Thank you.
Your next question is from Brennan Hawken with UBS.
Hey, good morning, Thank you for taking my question.
Just curious about the.
The $7 $4 billion in flows that was from a lift out.
Could you. Please I'm sure there's a there's sort of a definitional reason here, but normally when we think about lift outs. We think of that is flowing through the acquisition line. So what was the the nuance around that where it flowed through the on the flow line rather than the acquisition line. Thanks.
That's a really good question. Thank you because we do feel that this is a very specific circumstance. If you look at something like the o'shaughnessy that is.
Much more of a typical purchase all of the firm where the assets of the firm, including the <unk>.
Actual assets under management come with it what we did with the format of visa team was quite different that was an investment team that was essentially going to move to a new home. We were really pleased that when they had a number of platforms that they were looking at that they chose the Franklin platform because they thought it would be best for their clients.
Moved over as new employees to Franklin with absolutely zero assets and zero contractual relationships with any clients.
They then we're able to reach out to those clients and contract with them in to really essentially start a new business relationship with Franklin Templeton.
AUM was not purchased we simply hired the people we were thrilled that their clients and the consultants that back those clients.
Saw the strength from the platform such that we actually brought over more AUM than.
And then they had at the time of the announcement.
So I think that's a testament to the strength.
That others see in the Franklin platform, because we didn't purchase any assets. That's why it came through in the <unk>.
Hello, Mike.
Got it. Thanks, Thanks for that clarification, and then when we think about <unk>.
Matt I know it's <unk>.
<unk> here and thanks for all the color and trying to think about the business ex performance fees ex Lexington do you have any view on how to think about.
<unk>.
Core fee rate ex performance fees and ex Lexington from here should we think about just along with the industry continued downward pressure or do you have some visibility in.
In any.
Divergence from that overall path.
Yeah, Thanks, Bryan so.
Firstly, I think we feel pretty good about where our affair.
The effective fee rate, excluding performance fees and executing Lexington at this point I think we were just very slightly.
The down.
In the quarter versus last quarter based on a mix shift into institutional.
Which is slightly lower fee business from retail.
And that's what's going to really impact our fee rate versus.
Necessarily.
Larger fee cuts for example, because we think.
Very much generally in line, maybe even a bit lower.
Then the industry average in certain areas that have been under the most pressure there. So I think we feel pretty good about where we're at obviously when we when we include Lexington into the mix.
Hopefully beginning.
The second question I guess, it would be the third quarter when we when we report it but.
But.
Obviously, that's going to have a upward.
Pressure on the.
On that fee rate because that fee rates much higher on there so.
Way, we have it creates a little bit more of a cushion.
The potential to increase the fall a little bit.
Based on bringing.
Lexington in and then as we've said beforehand without stress, it's continued to grow the alternatives business.
We continue to be successful in that regard.
Assuming that the equity market.
As relatively stable lets say.
And we don't suddenly have tremendously stronger flows and expected entrenched institutional fixed income business, which has lower fees or money markets for example.
We feel pretty good about where the fee rate is and potentially with the growing <unk> business, even though a little bit of an increase from from where we're at today.
Great. Thanks for that color Matthew.
You Didnt mentioned closing date expectation changing should we still count on $3 31 generally.
Yes.
Already be April 1st just for accounting reasons. It so complicated to try to close something at the end of the directly at the end of the quarter and having to include all in that quarter. When we report a few weeks later, so we're more likely than not.
We think we're on track make very good progress.
To close around April 1st.
Excellent thanks very much.
Thank you.
Your next question is from Glenn Schorr with Evercore.
Hi, there.
Hmm.
Hello, there so.
So the improvement year on year in inflows extra distributions was.
Definitely lower redemptions I think gross sales were kind of flat year on year.
And you talked about the investments in oil, it's Lexington, coming onboard and all that so I wanted to talk about what you think specifically drive better gross sales.
Let's say for the rest of this year.
And then within there maybe if you could touch on what to expect in fixed income in other words theres been downside pressure on fixed income allocations now we have an inflationary backdrop rates are going to rise. Some version of a lot of corn to the many people. What do you think that's going to drive product wise across your platform.
Progresses. Thank you.
First thanks.
Great question and you may.
Recognize some of those stats on the gross defaults in the in the retail channel. So thank you for this.
Are you just take our U S. Obviously by far our biggest channel on the retail side.
We've grown that gross sales by.
That 13% in the last year versus the industry of seven to 10 right. So obviously in a place where we're getting it right we're seeing good growth.
And much greater diversification of assets.
And.
It's been the one challenge we had historically as you had a couple of products that accounted for an outsized portion now it's much more diverse.
We've had positive flows in U S and EMEA.
And then in places like Asia.
We had some hiccups in some markets which have held.
It helps us down, but actually seeing the same kind of positive in certain markets same kind of positive growth.
That we see in the U S and Europe . So we think when we.
We have some places where we had vulnerability and still some lumpy redemptions.
But but overall.
What we have intended to do which is diversify our business from a product standpoint from a geographic standpoint and from a client standpoint that we're doing that well, we're definitely seeing growth above the industry. So.
Ill put that there and then on the fixed income side look a couple of things. So first of all we have multiple franchises into fixed income, which have different views honestly in things like inflation and rates and actually have low correlation of where their alpha comes from so thats a good news right. We again that diversification is.
Important and then do you think about fixed income look rising rate environment is actually good for active management on the fixed income side, that's because you get say spread assets tend to outperform when rates go up.
Have things like private credit direct lending leveraged loans all of those things tend to be a place where you can get better returns.
The story in fixed income is not just duration and we think with the capabilities that we have we're well poised for where portfolios.
Portfolios have to allocate to fixed income not to mentioned that theres, a bunch of cash sitting on the sidelines that win.
When rates go up you think youll be able to coax some of that back into the fixed income market.
So.
We don't think the story is just don't.
They're going to go up and anybody who has a large fixed income franchises is gonna be hurting permit we actually think theres some real positive story there.
Glenn and I would add just a couple of things to that.
And that sales are kind of modestly up redemptions are significantly downward.
With both of those but the other thing that isn't as evident in the number is the significant cross selling we've had in terms of platform access and now that we are able to onboard for instance, Italy is a great example, where ft legacy ft had.
Lot of the largest banks all of the largest banks. They are platform access their legacy Legg had a lot of great investment product, but it wasn't on the platforms. We on boarded that product to the four largest bank platforms in Italy this quarter.
Exchange ability coming up at the end of this month in the U S. So all of those things all going quite well for better future sales.
I appreciate all that thank you.
Your next question is from Robert Lee with K B W.
Great. Thanks for taking my questions and good morning, everyone.
Maybe as a follow up to that Adam.
Youre talking about.
Getting more cross selling on platforms.
I believe this was kind of a key year post post the merger to kind of start seeing that leverage so.
What should we be looking for or is it very simply just an acceleration in gross sales or is there. Some type of mix that we should be thinking about as you kind of try to leverage this enhanced platform placement.
How from the outside looking in should we really kind of measure of that.
We're making measurable success I think I think there are a couple of things.
There's a number of advanced sub advisors, who are using us that's one of the most significant thing and are they using just one half of the house or the entire product range, we've seen significant <unk>.
Growth there too is.
Thank you, we'll see Cigna.
Significantly.
Yeah.
Lower redemption rates going forward to the extent that anyone is ever unsatisfied with the particular investment product now that we have double the products on the platform essentially there's an ability to switch from one to the other and still stay within the Franklin Templeton platform. So more number of advisors buying our.
Alex and buying a larger breadth and greater greater retention and the other thing that we've seen historically is that the larger number of products that one adviser brides from you. The stickier their assets are with you long term because you tend to develop a better kind of holistic relationship with them not just in asset management.
<unk> product sale relationship so as you see.
More products per advisor I think you'll see a stickier AUM base as well.
Great and then.
Sorry, just to add to that.
This ta converging. This month is really significant in the sense that for the firm.
First time.
We're able to do exchanges and there are some big firms that have just said if you're unable to do exchanges, we can't address other products on the platform.
No.
While we've seen some improvement in cross selling of advisors, who used to be either just legg Mason Franklin.
The real improvement should be happening now Adam and team are doing their job.
Great and then I guess, it's more of a metrics for Matt too.
Give us down the road.
Hey, Scott.
I'll add to the list.
Okay, great. So maybe as a follow up.
For Jenny.
So you did the north capital transaction, you made the investment in <unk>, which I know is there's a big capital raise.
Just within the alternative businesses I mean, how do you see those or maybe other technology investments sitting in your strategy as it really just more does it give you enhanced access having those those stakes is it.
Just trying to get a sense of you know what you feel like that brings to the table for you.
Yeah, Youre just take case right. So what is case to case offers.
Streamline.
For the retail anybody who's invested in private assets and know what the nightmare. It is to have to deal with all the forms.
Signing up pretty quick and showcase tries to streamline that making it much easier for an advisor to give clients access to the alternatives platform.
If you're an investor you have the ability to have the conversation about where you are and what gets showcase and gives you more of a pole position to be able to showcase your products. It doesn't mean that they're going to be closed architecture, but again shelf space and shelf positioning is always very important.
So that's partly how we think about the fintech investments that we do.
It's also Rob frankly, it's a little bit of co op petition. If you will in the sense that this is such a giant space and it's just going to become larger and larger so our view of it is even though we're investing ourselves significantly.
As Adam and Jenny mentioned in the distribution of alternative asset under out.
Roof directly we think partnering with others that are focused specifically on different areas of volts from a distribution servicing technology perspective.
Further enhances our own investments internally and frankly provides us with more opportunities across the business. So that's what we're most focused on and we've really enjoyed our time.
With these companies learning from them and hopefully then learning from us.
Getting generally more access.
Great and if I could squeeze in one quick quick one on the sale of embarking on technology.
Should we expect that it's going be a noticeable kind of gain that flows through in the second quarter just for modeling purposes.
Yes, it became <unk>.
Proximately $50 million.
Great. That's helpful. Thanks, guys. Thanks for taking my questions. Thank you.
Your next question is from Dan Fannon with Jefferies.
Thanks, Good morning, so kind of wanted to follow up just in terms of M&A in the go forward with Lexington closing here in the coming months, but still having plenty of liquidity and you guys had been highly active over the last kind of year and a half two years, how should we think about your appetite for more investments into our M&A going forward.
Well I think ill stop journey and then.
No.
I think as we've described before.
Before per annum after you take into consideration.
The dividend is very important and then the share repurchases, which would always do enough to at least hedge or employee grants.
To level out the share count.
After that if you rough.
Roughly look at the net income that we add to the mix you have over 1 billion adults. So every year that $1 billion.
We look at that and say Okay. In addition to what we've got on our balance sheet today and the financial flexibility that we have and now the mean.
The new revolver that we have it provides significant flexibility for us to continue to add to alternative assets to wealth management and to our distribution strategies that we've talked about.
And until we run out of those things to do to enhance and further diversify our business for our company our shareholders and very importantly, our clients obviously, because this is what they're demanding.
We are we are we will continue to.
Down that path, so M&A opportunities to further diversify our business expand what we have invest importantly internally in our specialist investment managers and then we get to.
Share repurchases after that and obviously the dividend is central to us, but we do have the capacity to do something meaningful that every year.
What we've also said though.
Is that if we get.
Some point, we will run out of those things to do and we'll be very comfortable with everything that we have from a business overall business mix perspective.
At that point, we will then think about.
Et cetera rating share repurchases and increasing our dividend.
Most significantly.
Great and then just a follow up I appreciate the guidance has already been given around expenses, but you did realize the last remaining component of the Legg Mason synergies and so as you think about the guidance for this year does that contemplate a further potential optimization of any of those businesses or is it.
Just basically as you said on AUM levels here and kind of your business planning.
As you see it.
No I'd say, it's based mostly on where we see the markets today at this at this point.
And I think I've said before that.
We do have some additional levers to pull if we need to given that for example.
Wage inflation.
<unk> environment for talent, we're obviously extremely focused on that again, we think our compensation ratio is highly competitive it shows that we're paying for what we need to pay for to get the best people at the firm and retain and attract and the rest of it so.
They were very very focused on that but we were.
We're more likely to look to use those levers at least the next 12 months to ensure that we can continue to manage our expenses at the guidance, we've given versus trying to come in much lower than that but as we've said, we certainly do have those levers to pull Jenny mentioned earlier on about the Ta outs.
Sourcing the Ta outsourcing itself per se.
It's mostly about savings to the pumps, which is terrific service is going to be tremendous unique as Jenny mentioned as we've announced but it also saves money for the funds.
For us it becomes about functions supporting the Ta.
And at some point in the next year, we will get to dig into those things and see if we can be more efficient in other places and thats, what I define as another lever internally.
Great. Thank you.
Okay.
Your next question is fantastic debit with autonomous research.
Hey, good morning, guys.
Good morning.
Matthew given your background and an asset manager M&A.
Perhaps even more broadly could you kind of frame.
Your views through your experience of how how 'twenty two could look from a pipeline standpoint, given the more volatile markets and maybe any thoughts around.
Your view of it potentially being different than your historical experience for any reason.
Okay. Thank you I think the first thing I'd say is that whatever the market conditions. There is no such thing in our opinion.
Buying something really good.
For a lower price just because the market's aloha is simply not for sale at that point in time, So just make that point clear.
I think the pipeline what we're seeing in terms of the pipeline across alternative assets and wealth management. In particular is very significant I don't think we've ever seen it as active.
I don't really see that changing going into 2022 in.
In wealth management there is a.
A fair amount of consolidation happening.
And a lot of opportunity to offer increased services and support to ever increasing demands from complex client needs. So that's happening.
In wealth and fiduciary trust is a tremendous business a tremendous platform. It's got a storied history and brand that we can utilize to attract excellent businesses. As we've mentioned the two acquisitions that we've made through fiduciary trust, which is Penn trusts and athene or grown.
Collectively by I think 40% to 45% since the acquisition.
Announcements.
Little over 18 months or two years ago or so so.
That's one and then in the alternative asset arena.
It's incredibly busy on a global level.
Ticket or in Europe , and the United States, I'd say and while we're very comfortable with what we've acquired.
And we're very excited frankly, even if we did nothing else.
With what we have.
Under the tent here.
We do see a couple of other important.
Sectors within alternative assets.
But we think we can help grow in would be an important offering for out for our clients and our shareholders frankly, and therefore will benefit from that when we when we if we come to acquire those things, but so I see the pipeline as being very strong opportunities are meaningful.
A lot of competition for.
These things both in wealth and alternative assets, but I think we have I've already referred to fiduciary Trust and I think we're really excited about our narrative.
And how it has resonated with some of the leading companies out there. Most recently Lexington for example, where I think we were we were an extremely good company around Lexington.
While it wasn't.
Of wide process, because it didn't need to be.
There was some extremely credible parts involved in that.
Sighted that.
<unk> chose chose Franklin.
So that is.
That is sort of the update on the M&A front by the way the Jennie O. Adam you want to add anything.
Got it thanks.
And it was very helpful to us.
Yes go ahead.
Yeah.
Thanks, Patrick.
One quick one on.
I think Matthew you said.
Do you expect the pro forma election revenue to be more like $1 2 billion plus anything specific you can point to driving that or is it just kind of better visibility on their fund raising pipeline at this point.
I think it's really across all of the old space I mean Clarion and.
Benefit Street partners have their own really meaningful opportunities clarion into real estate.
Arena.
Very strong performance has really meaningful growth.
An exciting pipeline in and that they they fortunately are exposed to the areas that are experiencing the most significant growth. So for us that's a tremendous and same with benefit Street partners you know the whole.
Alternative credit area.
We think that the potential to globalize that business would be larger in in another geography.
Is exciting.
Exciting for us So I think it's those two things and then.
We unfortunately cannot comment on.
Lexington fundraising processes or anything like that we'll be able to comment on that in may.
The make whole.
After we've closed Lexington, but I'll.
I'll, just say that everything is going very much to plan as it relates to Lexington, and we're really excited to be.
Loathing that.
April and the guide that we gave on both revenue.
Which I think we said for <unk>.
Annualized basis, it would be $350 million for Lexington, and on an EBITDA level around $150 million, we would continue to stick with that with that guide.
And let me just add one thing on that again.
Again, we've talked about.
Opportunity in the retail space for alternatives.
We feel incredibly fortunate to have the properties that we have with the outstanding performance that they have you just look at Clarion and you look at some of the competitors in the retail space.
Assets coming in and clearing performance compete.
Hadn't had no problem in that space, we have a tremendous reputation in the retail space.
The challenge there is it's actually really hard because there is a whole education process that happens.
With any kind of manager so that takes some time to be able to bring in alternatives capability in the retail but to have the types of products that we have and distribution capability.
We're focused on solving kind of that education component of it and then I would just say that if youre going to bring private equity to the retail space Secondaries, We think it's a better way to do it because you don't have the J curve issue that you have in the in the institutional space there and so Lexington, we think it's just a great opportunity. So you have the prop.
<unk> you have the reputation and now it's just figuring out how to how to sell it. So that's kind of the final component.
Helpful. Thanks.
Your next question is from Michael Cyprus with Morgan Stanley .
Good morning. This is Stephanie filling in for Mike I, just have a quick follow up on the performance fees. Matt can you just remind us the fee arrangement with Clarion and when does legacy pass through performance fees when that starts coming on if not already and how meaningful could that be to the performance fee outlook.
Thank you for the question that thought she already happened.
No.
Performance fee arrangement with Clarion with respect to pass through fees the pass throughs for almost a year.
Zero now.
Great. Thanks, and then maybe just lastly on the pipeline that $13 billion this quarter.
Wondering if you can give us some color on how the asset mix has evolved or different types of mandates are b rates sitting in the pipeline now how that's trended versus last quarter.
Yes, there is not a really a significant change there I would say from an asset class perspective fixed income is the largest percentage of that but we also have.
Very very healthy dose of alternatives and equities in there as well there was a really a slight change in the overall level, but that does not at all reflect the strength of the institutional business. In fact, I would tell you we're doing better and better in the institutional space. The truth is what that's really measuring the business that.
You've won.
But hasnt actually funded yet so to the extent that you fund the business more quickly that number will actually come down a bit so the institutional business is really quite strong.
Net income is the biggest asset class, but.
A big chunk of others fixed incomes roughly half of it in terms of fee rates really I would say, we haven't seen a change in the feeds that we're doing institutional business that over the last few quarters.
And just just just back to performance fees. The second I think maybe one guy that could be helpful. Because I think in the past. We've said 50 50, just a rough guide on comp to.
Revenue performance fee revenue.
It is.
I would just update modeling to make that 55%.
Because when we look at the mix of performance fees now.
And we calculate where we think that's heading in.
Assuming 55% performance fees.
Become compensation I think it is a is a better model than 50%.
Great. Thank you.
Thank you.
Your next question is from Robert Lee with K B W.
Great. Thanks for taking my follow up and I was just curious maybe just going back to expenses.
When you did the leg transaction you know one of the things that you.
You made a point.
Points that you werent going to touch at least initially was the any of the kind of relationships with the.
Sure.
The investment affiliates in the western and whatnot.
That was you know maybe left for a later date and then maybe this is I don't know if this is touching a third rail or not but 18 months. In you know things are starting to click you know is there an opportunity to revisit any of those that may help.
<unk> see your costs.
Overall for the company.
Yes, yes.
Firstly, we don't we certainly don't think that is a third row roughly we are very open great dialogue with all of our company and in fact most.
Most of the leadership at the largest specialist investment managers that are on our management Committee or Executive Committee. So we're very open discussions about these things and we're all in this together to be as efficient as we can I would just I would say that in terms of our focus internally, we have a long list of things and potential that we're working through.
We've got enough potential from a cost synergy perspective.
Outside of some of those larger specialist investment management.
Components of the firm that you are talking about our focus with those aspects of the company is all about revenue growth growth opportunities and we yes, we do talk about expenses when we talk about so for example, when we we talked about the transpiration. We took about fund administration, we talk about all the technology services across the company, it's not just sort of a holding company.
Ft discussion, it's a discussion involving all the specialist investment managers.
And we can see in future years, there will be absolutely obvious areas, where we will collectively bring expenses down as the company, but we also are a conservative company with very methodical. It has to be one thing at a time and frankly, we've got enough to get on with.
Outside of what Youre, specifically, referring to and therefore, we're able to focus more on growth opportunities in revenue with the specialist investment matches legacy Legg Mason.
Great. Thanks for the added color appreciate it.
Thank you Rob.
This concludes today's Q&A session I would now like to hand, the call back over to Jenny Johnson Franklin President and CEO for final comments.
Great well, thank you everybody for participating in today's call.
Made a lot of exciting progress and in so many ways I can tell you. We just feel like we're getting started so once again, we'd like to thank our employees for their hard work and remaining absolutely focused on our clients and on each other.
And we look forward to speaking to all of you again next quarter. So thank you everybody and stay healthy.
Thank you. This concludes today's conference call you may now disconnect.