Franklin (BEN) to Buy O'Shaughnessy Asset Management
The acquisition of OSAM strengthens Franklin's (BEN) position as a separately managed accounts provider and boosts customization capabilities.
Franklin Resources, Inc. BEN announced the acquisition of O’Shaughnessy Asset Management, LLC (“OSAM”), a preeminent quantitative asset management firm, thereby, bulking up its offerings in the separately managed account (SMA) space.
The transaction is subject to customary closing norms and is anticipated to close in fourth-quarter 2021.
Franklin is already one of the largest providers in the SMA industry, with $130 billion assets under management (AUM) as of Aug 31, 2021. Through the acquisition, the company will leverage OSAM’s factor-based investment management and custom indexing solution capabilities via the latter’s popular flagship Canvas platform.
Since the Canvas platform was rolled out in late 2019, it has seen robust growth, with $1.8 billion AUM of OSAM’s aggregate $6.4 billion AUM as of Aug 31, 2021.
Encouragingly, Canvas facilitates financial advisors to build and manage Custom Indexes in SMAs, which are curated per clients’ particular needs, preferences and objectives. The platform also allows advisors to create investment templates, utilize passive strategies, access factor investing strategies, and apply ESG investing and SRI screens in accordance with client’s personal beliefs.
It will also enable advisors to aptly plan, finalize tax budgets, zero in on realized and unrealized gains and losses, and sell certain positions to create offsets. Canvas platform aside, OSAM’s foothold in factor-based investing will also be beneficial for Franklin.
Management at Franklin noted, “Custom Indexing is aligned with our commitment to bringing sophisticated customization to a broader investment audience”. The company’s focus on custom indexing is a strategic fit, given the increasing popularity of thematic investing and higher demand by investors for customization in their investment portfolios.
Management remarked, “this partnership will further enhance Franklin Templeton’s ability to deliver compelling individualized SMA solutions to clients, advisors and firms while continuously innovating to advance and shape the managed accounts industry.”
In the last couple of years, Franklin has grown through acquisitions, thereby, enhancing its foothold. Such acquisitions will support the company in improving and expanding its alternative investments and multi-asset solutions platforms, which will help it provide world-class investment solutions to clients. Notably, Franklin concluded the all-cash acquisition of Legg Mason in July 2020, with the majority of cost synergies being realized.
However, overall high net outflows will likely keep the AUM balance under pressure.
Shares of the company have lost 1.4% over the past six months against 11.1% growth recorded by the industry.
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The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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