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Franklin Resources (BEN) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q2 FY26)· Financials· Apr 28, 2026

Source: earnings call transcript

Executive summary

Franklin Resources Q2 FY26 — Strong Long-Term Inflows and Private Markets Fundraising

Franklin Resources reported a strong Q2 FY26, marked by significant long-term net inflows and record gross sales, driven by diversified growth across private markets, ETFs, and its Canvas customization platform. The firm is executing ahead of its multi-year strategic plan, focusing on innovation in digital assets and expanding its global footprint. Management provided an optimistic outlook for continued margin expansion and capital allocation, while addressing specific questions on tax optimization strategies and the evolving landscape of ETF distribution.

Highlights

6

  • Delivered $16.9 billion in long-term net inflows, reflecting strength across diversified platforms.

  • Achieved record gross sales, with non-U.S. gross sales growing 29% quarter-over-quarter.

  • Private markets fundraising reached $14.3 billion this quarter, including $13.2 billion in private market assets, positioning the firm to exceed its annual target.

  • ETF AUM reached a new high of $61.6 billion, a 67% increase from last year, with $4.5 billion of net inflows.

  • Canvas AUM grew to $22.9 billion, a 27% increase from the prior quarter, with $5.3 billion in net inflows.

  • Adjusted operating income was $475 million, increasing 8.5% quarter-over-quarter and 25.8% from the prior year quarter.

Concerns

3

  • Equities experienced net outflows of $4.7 billion during the quarter.

  • Fixed income saw net outflows of approximately $300 million, though positive excluding Western.

  • G&A expenses are expected to be elevated in Q3 FY26 at $210 million to $215 million, including $23 million to $25 million in fundraising-related fees and $9 million to $10 million for advertising and marketing.

Guidance & targets

CategoryTargetConfidence
Annual Private Markets Fundraising Target
Exceed $25 billion to $30 billion
high materiality
High
Q3 FY26 Effective Fee Rate
Mid- to high 37s
medium materiality
High
Q3 FY26 Compensation Expense
$830 million
medium materiality
High
Q3 FY26 Information Systems & Technology (IS&T) Expense
$155 million
medium materiality
High
Q3 FY26 Occupancy Expense
$70 million
medium materiality
High
Q3 FY26 General & Administrative (G&A) Expense
$210 million to $215 million
medium materiality
High
Full-Year FY26 Expenses (excluding performance fees)
Approximately in line or slightly above fiscal year '25 expenses
high materiality
High
Full-Year FY26 Investment Management Fee Revenue Growth
At least 6% year-over-year
high materiality
High
Fiscal Q4 FY26 Operating Margin
High-29s
high materiality
High
Full-Year FY26 Operating Margin
27%
high materiality
High
Longer-Term Operating Margin
30% plus
high materiality
High
Capital and Co-Invest Balance Sheet Allocation
Close to $3 billion
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Multi-asset
Generated significant positive net flows, marking 19 consecutive quarters of positive flows, reflecting growing client demand for outcome-oriented solutions.
AUM: $207 billionNet Flows: $9.5 billion positiveConsecutive Quarters of Positive Flows: 19
————
Equities
Experienced net outflows, though positive net flows were seen in large-cap value, core systematic, single-country ETFs, infrastructure, and sector strategies.
Net Outflows: $4.7 billion
————
Fixed Income
Overall net outflows, but positive net flows when excluding Western, with momentum in multi-sector, munis, stable value, and global fixed income strategies.
Net Outflows: Approximately $300 millionNet Flows (excluding Western): Positive $3.6 billionConsecutive Quarters of Positive Flows (excluding Western): 9
————
Alternatives
A leading manager of alternative assets, with strong fundraising diversified across alternative credit, secondary private equity, real estate, and venture funds.
AUM: $283 billionFundraising: $14.3 billionPrivate Market Assets Fundraising: $13.2 billion
————
International
Achieved globally diversified growth with positive net flows across all regions, particularly strong momentum in EMEA and APAC.
AUM: Nearly $500 billionLong-Term Net Flows: $5.5 billion positiveNon-U.S. Gross Sales Growth: 29% QoQ
————

BEN operating KPIs by quarter

BEN operating KPIs stated on its earnings calls, by fiscal quarter
KPIThis call Mar 2026 Q2 FY26 Jun 2026 Q3 FY26Change vs prior quarter
Long-term net inflows
$16.9B This was an excellent quarter for Franklin Templeton, with $16.9 billion in long-term net inflows across public and private markets, reflecting the strength and breadth of our diversified global platform. Source: earnings call transcript
$18.4B The results we reported today reflect strong execution in the quarter with $18.4 billion in long-term net inflows bringing fiscal year-to-date long-term net inflows to $63.3 billion. Source: earnings call transcript
+8.9%
Assets under management (AUM) Alternative
$283B Franklin Templeton is a leading manager of alternative assets with $283 billion in alternative AUM. Source: earnings call transcript
$294B Alternative AUM reached a record $294 billion during the quarter after $3 billion of realizations and distributions. Source: earnings call transcript
+3.9%
Assets under management (AUM) ETF
$61.6B ETF AUM reached a new high of $61.6 billion, a 67% increase from last year with $4.5 billion of net inflows, our 18th consecutive quarter of positive flows. Source: earnings call transcript
$75.6B Our ETF franchise reached a record $75.6 billion in AUM with $7.1 billion of net inflows during the quarter. Source: earnings call transcript
+22.7%
Assets under management (AUM) Retail SMAs
$168.3B A leader in retail SMAs, we managed $168.3 billion in AUM and generated $2.7 billion in net inflows during this quarter. Source: earnings call transcript
$187.6B Our retail SMA business reached a record $187.6 billion AUM with $4.4 billion of net inflows, while Canvas, our custom portfolio solutions platform grew to a record $30.3 billion in AUM with $3.7 billion of net inflows. Source: earnings call transcript
+11.5%
Assets under management (AUM) Canvas
$22.9B Canvas continues to gain momentum and reached record AUM of $22.9 billion, a 27% increase from the prior quarter with positive net flows of $5.3 billion, reflecting strong client interest and personalization and tax efficiency. Source: earnings call transcript
$30.3B Our retail SMA business reached a record $187.6 billion AUM with $4.4 billion of net inflows, while Canvas, our custom portfolio solutions platform grew to a record $30.3 billion in AUM with $3.7 billion of net inflows. Source: earnings call transcript
+32.3%
Assets under management (AUM) International
<$500B Internationally, Franklin Templeton manages nearly $500 billion in assets with a positive long-term net flows of $5.5 billion in aggregate. Source: earnings call transcript
~$525B International AUM reached approximately $525 billion with positive long-term net flows in every region. Source: earnings call transcript
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Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

ProductTypeDetails
Franklin Cryptolaunch
Muni Funds to ETFs Conversionlaunch
Tokenized ETFs on Crypto Exchangeslaunch

Deals & partnerships

250 Digital Acquisition of an active cryptocurrency investment management firm.

Part of the strategy to launch Franklin Crypto and bring together crypto-native expertise with global distribution to target institutional growth.

Microsoft Partnership to build the 'Intelligent Hub' platform for distribution.

Microsoft assisted in building the multi-agent orchestration AI platform used for distribution, integrating data from CRM, product systems, and social media to optimize salesperson interactions.

National Investment Fund of Uzbekistan Appointed as trustee and manager.

Appointment in January 2025, with UMF confirming plans for a dual listing on London and Tashkent Stock exchanges in April, advancing Uzbekistan's capital markets.

Risks & headwinds

Equity Market Outflows Q2 FY26

$4.7 billion in net outflows

Mitigation:Focus on positive net flows in specific strategies like large-cap value, core systematic, single-country ETFs, infrastructure, and sector strategies.

Fixed Income Market Outflows Q2 FY26

Approximately $300 million in net outflows

Mitigation:Excluding Western, fixed income flows were positive $3.6 billion, with momentum in multi-sector, munis, stable value, and global fixed income strategies.

Elevated General & Administrative (G&A) Expenses Q3 FY26

$210 million to $215 million in Q3 FY26, including $23 million to $25 million in fundraising fees and $9 million to $10 million for advertising/marketing

Mitigation:Management views these as associated with good fundraise expectations and strategic investments, expecting overall expense growth to be outpaced by revenue growth.

Potential Adverse Tax Rule for Exchange 351

Discussed as a potential change in tax rules for index ETFs and high net worth strategies involving in-kind exchanges

Mitigation:Management noted that their major ETFs do not use options overlays in their construction. They also highlighted that the firm has not heavily participated in the specific high net worth strategies that might be impacted. They believe the broader discussion is about fairness for mutual funds vs. ETFs.

ETF Distribution Fees Requested by Intermediaries

Platforms wanting more revenue share for ETF distribution

Mitigation:Management evaluates platforms based on their ability to positively influence growth and opportunity for ETFs. They noted that financial advisors are becoming more independent, and large RIAs often make their own decisions regardless of platform influence, requiring a 'hand-to-hand combat' sales approach.

What to watch in Q3 FY26

Private Markets Fundraising

Next quarter / FY26
Current $22.7 billion FYTD
Target Exceed $30 billion for FY26

Why it matters

Exceeding the raised annual fundraising target would signal continued strong demand and execution in a key growth area.

Fiscal year-to-date fundraising in private markets reached $22.7 billion, already in line with full year 2025 levels, positioning us to exceed our $25 billion to $30 billion annual fundraising target, which was already adjusted upward start of our fiscal year.

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Q&A highlights

Requested a breakdown of the $13 billion private markets fundraising by strategy and the contribution of Lexington's flagship fund. Also asked for clarification on the non-fee-paying portion of alternative AUM and its timing to become fee-paying.

Management stated that private credit managers were the largest contributor, but Lexington was meaningful, with its flagship fund on track. They noted over 30 vehicles contributed to the diversified fundraising. For fee-paying AUM, they clarified that approximately 90% of alternative AUM has the potential to earn fees, while current fee-generating AUM is about 80% of the $283 billion.

“But Alex, fee earning AUM out of balance is about 90%, 89% approximately. Do you want to...”

asked by Alex Blostein · answered by Matthew Nicholls

3 min read 6 chapters

Detailed narrative

Strategic Execution and Diversified Growth

Franklin Templeton reported an excellent quarter, demonstrating the effectiveness of its multi-year strategy. The firm achieved $16.9 billion in long-term net inflows and record gross sales, with positive long-term net flows across every region. Key growth drivers, including private markets, retail SMAs, Canvas, ETFs, and solutions, all contributed significantly, indicating a resilient and diversified business model. The company is ahead of its 5-year plan, focusing on investment outcomes, client relationships, and evolving capabilities for sustainable growth.

Private Markets Momentum

The company saw strong momentum in its alternative assets, with $283 billion in AUM. Fundraising in alternatives reached $14.3 billion this quarter, including $13.2 billion in private market assets. Fiscal year-to-date private markets fundraising hit $22.7 billion, already matching full-year 2025 levels and positioning the firm to exceed its updated annual target of $25 billion to $30 billion. Growth was diversified across alternative credit ($96 billion AUM), secondary private equity, real estate, and venture funds, with evergreen products contributing approximately $1 billion in net flows in each of the last two quarters.

ETF and Customization Platforms (Canvas)

Franklin Templeton's ETF platform reached a new high of $61.6 billion in AUM, a 67% increase year-over-year, driven by $4.5 billion in net inflows. Active ETFs now constitute 45% of the total ETF AUM, extending active management strategies into new vehicles, such as the conversion of 10 muni funds into ETFs, which generated over $600 million in net flows. The Canvas customization platform also saw significant growth, reaching $22.9 billion in AUM with $5.3 billion in net inflows, reflecting strong client interest in personalization and tax efficiency. Tax-managed products, including Canvas, now represent $110 billion in AUM.

Digital Assets Strategy

The firm continues to invest in long-term innovation, with digital assets remaining a key focus. Franklin Templeton announced plans to acquire 250 Digital, an active cryptocurrency investment management firm, and launch Franklin Crypto. This initiative aims to combine crypto-native expertise with Franklin Templeton's global distribution to target institutional growth and expand existing crypto and blockchain offerings. The company is also exploring tokenized ETFs on crypto exchanges like Kraken and Onduo, leveraging blockchain for efficiency and tapping into new client bases with digital wallets.

Financial Performance and Expense Management

Adjusted operating income for the quarter was $475 million, an 8.5% increase quarter-over-quarter and 25.8% year-over-year, reflecting disciplined expense management alongside strategic investments. Management provided Q3 FY26 expense guidance, including $830 million for compensation, $155 million for IS&T (due to AI investments), $70 million for occupancy, and $210 million to $215 million for G&A (including elevated fundraising and marketing costs). The firm anticipates full-year FY26 expenses to be slightly above FY25, with investment management fee revenue growing at a significantly higher rate, leading to projected operating margins of high-29s in Q4 FY26 and 27% for the full year, with a long-term target of 30% plus margins by late 2027.

Capital Management Priorities

Franklin Templeton's capital management priorities include maintaining its dividend, which is increased annually. Organic growth, particularly through co-investments, is taking up more capital, with balance sheet allocation expected to reach close to $3 billion by year-end FY26, up from $2.9 billion this quarter. The firm also engages in opportunistic share repurchases and M&A activities, primarily focused on distribution-related bolt-ons and strategic partnerships, especially in alternative assets overseas.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.