Franklin Resources (BEN) continues benefiting from retail investors’ perceptions that fixed income represents less portfolio risk than equities, and they are expected to continue using this investment strategy until higher long-term interest rates begin to drive losses in bond funds, says Jason Weyeneth, Lead Analyst at Sterne Agee & Leach, Inc.
“I think a name like Franklin Resources is well-positioned in that environment as well as about any environment that I can think of, at least for the near term, for a few reasons. First, within fixed income, BEN is a leader in global bond products, which I believe are an attractive asset class given they are underowned by U.S. retail investors within fixed income allocations, and the strategies are generally lower duration, so there is less interest rate risk as global rates are set to rise,” Weyeneth said.
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BEN also has a sizable equity platform and exposure to global investors, who many times have different goals in mind than domestic investors. Weyeneth says the multiprong strategy of the company along with distribution is expected to continue helping share flows.
“BEN is a very global franchise, so the firm is not entirely reliant on U.S. investors, and global investors often have a different mindset or are influenced by different factors than U.S. investors. And third, I think their equity platform is better positioned than the market perceives. They have a very sizable equity platform, they have generally good performance across that platform, and they have very strong distribution relationships, which I think would drive more than their fair share of flows,” Weyeneth said.
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