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Tuesday, May 17, 2022

What Is This $1.5T-AUM Titan's Chief Hunting For?

Reported by Neil Anderson, Managing Editor

The chief of a $1.4558-trillion-AUM (as of April 30), publicly traded asset manager says she's on the hunt for three different types of acquisitions.

Jennifer M. "Jenny" Johnson
Franklin Resources, Inc. (dba Franklin Templeton)
President, CEO
Jenny Johnson, president and CEO of Franklin Resources, Inc. (dba Franklin Templeton [profile]), said this afternoon that one area of acquisition interest for the San Mateo, California-based mutual fund firm is filling product gaps (a consideration that is sometimes geographic, as some specialties don't translate well across borders).

"You at a minimum have to be in the region," Johnson said at the 2022 Morningstar Investment Conference at McCormick Place in Chicago. "We look for a bolt-on transaction there."

Johnson spoke on stage in the "A Conversation with Jenny Johnson" keynote session. She was interviewed by Sarah Bush, North American manager research practice leader for Morningstar's research services arm.

Another area of acquisition interest, Johnson said, is Franklin's wealth business, which she'd "like to grow further." And the third area she's hunting in is technology.

"We invest in technology to build deeper relationships with partners," Johnson said. "The world has changed with the fee-based advisor. They're expected to provide the services that used to be reserved for the ultra high net worth."

Johnson also offered her perspective on cryptocurrencies, revealing that while she's not that interested in bitcoin, she finds "the disruption in blockchain" to be extremely promising. She likened ethereum to the launch of the iPhone, offering "a platform where people are building business on it."

On the subject of diversity, equity, and inclusion (DEI), Johnson described the issue as a big opportunity for the investing world.

"DEI is an absolute growth story for everybody," Johnson said. "It's a growth story from a talent management standpoint ... from a distribution standpoint ... and an investment opportunity."

She urged fellow fundsters and FAs to build their pipelines, recruiting women and minority interns from college and even high school to diversify the talent pool.

"We're losing them before they even apply," Johnson said.

On the subject of making workplaces more friendly to women and minorities, Johnson noted that it's not enough to just change policies. She urged "male allies" to help change companies' cultures by using those changed policies themselves. For example, she gave the example of a male boss telling his team when he's leaving the office early to take a daughter to a soccer game or a son to a doctor's appointment.

"The stigma on men is just as significant," Johnson said.

On ESG, Johnson said that firms that already work in Europe have an advantage, as both the clients and regulators there have been pushing more on ESG than have folks in the U.S. It's all about thinking about "risk, return, and impact," she said.

"It's a great opportunity for advisors. The industry is absolutely going this way," Johnson said, offering her own lingo adjustment suggestion. "'Sustainable finance' is probably a better term than ESG."

Johnson also offered some perspective on being a fundster chief, managing fellow fundsters and a host of different investment boutiques. She had a warning for fundsters who make acquisitions.

"You're buying people and you're buying investment processes, so don't mess with that!" Johnson said, adding that avoiding disruption for investment teams is "the most important thing."

Keeping investment teams on track when their styles are out of favor is a challenge that Johnson likens to a certain non-financial profession.

"You're almost like a therapist," Johnson said.

Johnson touched on a variety of other topics, including: Franklin's acquisition of Legg Mason; the rise of alternatives and direct indexing; innovation; the future of the asset management office space; and more. 

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