Traditional Asset Managers: The Bull: Broad net flow recovery emerging in May; Maintain Buys on AMG/BLK

Research evidence excerpt

Traditional Asset Managers: The Bull: Broad net flow recovery emerging in May; Maintain Buys on AMG/BLK

utflows but have remained positive overall for

the fifth consecutive month. In April, BEN’s total US mutual & ETF business net flows

were -$1B and international flows were +$1B. LT net outflows of $1B in US retail funds

were driven primarily by redemptions in fixed income (-$1B) while total net outflows (-

$4B) were lower due to money market outflows (-$3B). Western Asset Premier

Institutional Government Reserves, Western Asset Institutional Government Reserves

and Western Asset Institutional US Treasury Reserves were the largest outflow

contributors while Putnam Focused Large Cap Value ETF, Franklin Institutional US

Government Money Market and Franklin FTSE Taiwan ETF each generated over $450M

of net inflows. Looking ahead, Morningstar May data tracks improving equity, fixed

income and money market flows at BEN.

BEN’s investment performance weakened and is below the peer average

Over the past 12 months, BEN’s overall relative investment performance has

deteriorated on a 3Y basis (28% of mutual fund/ETF AuM outperforming vs. 39% for our

coverage). Likewise, many of its flagship funds are not faring well over the last 12

months including Mutual Discovery, Aggressive Growth and Franklin Income Fund, which

have all underperformed by more than 400bps (vs. Morningstar Category).

BEN’s monthly net flows should rise in May (reversal of negative seasonality)

We expect net flows to improve in May given the reversal in seasonality (tax outflows in

April), industry re-risking activity post strong 2QTD markets and continued deceleration

in Western Asset Management’s redemptions which have stabilized in the -$1B range.