Franklin Templeton turns the tide
In June, a saga that fuelled a torrent of outflows from Franklin Templeton reached an abrupt denouement.
Ken Leech, former star bond investor at the group’s Western Asset Management fixed-income unit, pleaded guilty to obstructing an investigation into alleged “cherry-picking” of trades for favoured portfolios.
Leech had been charged by US prosecutors with criminal fraud in November 2024 for allegedly orchestrating a $600mn scheme to improperly allocate trades to particular portfolios at Western. With his obstruction plea, he avoided a trial set to start on June 15 and — under an agreement with the US Justice Department — the other charges were dropped.
Franklin had suffered more than $150bn in redemptions from its Western business since Leech was charged in 2024. The group also agreed to a $100mn settlement with the Securities and Exchange Commission days before Leech’s plea.
But for the California-based asset management giant, financial wounds aside, the news represented a form of closure on a painful chapter.
“When something like that comes along, your job is to deal with it while also keeping the business moving forward,” Franklin’s chief executive Jenny Johnson said in an interview with the FT. “You try to isolate who’s impacted by it, and then continue to move forward on your strategic priorities.”
While Western’s redemptions have moderated this year, overall Franklin flows have turned consistently positive over the past three quarters. Analysts said questions remained for the wider industry about the sustainability of growth in active asset management as passive competition heaps pressure on fees.
Still, they noted Franklin — one of the world’s largest active investors, with $1.8tn under management — appeared well positioned in an environment where scale has become critical for success.
Analysts are warming to Franklin’s turnaround. “You’ve got an improving story, better on the cost side, the Western headlines going away,” said Ben Budish at Barclays. “Within financials, lots of other stuff has some hair on it, some AI disruptive threat, private credit, whatever it may be, but Franklin doesn’t. It’s one of the improving stories.”