Franklin Templeton’s Martyn Gilbey joined the agency from Aberdeen Asset Management (now abrdn) nearly 5 years in the past. At the time the transfer meant that he could be working a enterprise that was ten instances smaller, however he felt there was a big alternative for progress.
Since then, Franklin Templeton has grown organically in addition to by means of acquisitions. Over the previous couple of years Franklin Templeton purchased Lexington Partners, O’Shaughnessy Asset Management, the funding grade credit score staff from Aviva Investors and Legg Mason. More lately the agency introduced the acquisition of European credit score and personal debt specialist, Alcentra.
Now the UK enterprise makes up $19.5bn (£15.4bn) of the agency’s international $1.5trn (£1.2trn) property beneath administration.
The CEO of the UK enterprise spoke to Investment Week’s options editor Kathleen Gallagher concerning the integration of the corporate, the agency’s enterprise mannequin, the potential for future acquisitions and the alternatives introduced by tokenisation.
Specialist funding managers
Franklin Templeton has a mannequin of specialist funding managers, or what they name ‘SIMs’, that sits inside the wider enterprise. According to their web site, there are 18 of those, a number of of which maintain some type of the Franklin Templeton model and others, equivalent to those who got here throughout from Legg Mason, which have fully totally different manufacturers.
These SIMs have their very own CEOs and CIOs and the companies decides how a lot they have interaction with the company features provided by Franklin Templeton, equivalent to distribution, human sources or know-how.
Having totally different sub-businesses actually has it advantages, together with the power to pitch a number of of Franklin Templeton’s managers for a similar mandate. Gilbey gave the instance of a current mandate the place three of their companies had been shortlisted.
“That’s a fantastic place to be,” he says. “It illustrates the power of our of our business model where we can have two businesses running money independently in their own way, both of which reach a final on a large mandate.”
He says this flexibility “differentiates” Franklin Templeton from different companies that additionally run an affiliate mannequin, and has helped quicken the tempo of integration of acquired companies.
Legg Mason’s integration into the mannequin was extremely important, in response to Gilbey, who spoke at size about what the agency delivered to the enterprise.
The acquisition was accomplished on the finish of July 2020 and meant the mixed group had $1.4trn (£1.1trn) in property beneath administration globally. This has “accelerated the transformational journey”, Gilbey provides.
He provides the instance of Western Asset, a set earnings supervisor, and Martin Currie, a world fairness specialist, each of which got here throughout as a part of the Legg Mason deal.
He says that when Western joined it had a view that it’d be “pretty arm’s length with Franklin Templeton”, whereas for Martin Currie “they effectively do their distribution for them in the UK”.
“What I would say about our friends at Western is we are very pleased to say we help them win a couple of mandates in the last 12 months of more than £1bn worth of new business in global unconstrained bond mandates.
“And they would say very openly that those opportunities came along principally because of the contacts that my team have.”
He provides that he feels “even with Western” the cultural and behavioural integration of the Legg Mason companies has occurred “more quickly… than we thought we might be when we started this journey two years ago”.
However, the mannequin additionally has its challenges, certainly one of which reared its head dramatically with Russia’s invasion of Ukraine.
When the invasion occurred, the agency calculated its complete publicity to Russia and Ukraine throughout all the companies, and located that it was minimal at 0.5% of world AUM.
However, the following step was trickier as a result of their mannequin means the companies have their very own funding philosophies and subsequently technically might make their very own choices about what to do with these property and potential future funding within the nations.
“It does highlight one of the challenges of our business model, which is we don’t run a top-down autocratic kind of culture where we have, for example, one CIO that says what all the investment teams was doing.
“When something like Russia or Ukraine happens, or ESG is another good example, I think clients do want to know what the investment team they engage with, is thinking and doing. But understandably, they also want to know what’s the corporate position.”
He says this requires the agency to be “culturally organised” and “prioritise time to come together to enable us to answer client questions”.
However, Gilbey flags the result doesn’t essentially imply they’ve “one voice”. However, within the case of the Russia/Ukraine scenario, the view “collectively was this is a moral and ethical issue and we need to not be trading”.
Given Franklin Templeton’s mannequin of SIMs extra acquisitions are inside the realm of risk, significantly if it “complements” the present managers, Gilbey says.
“Where we are acting is looking to either gap fill from a product perspective, or from a geography perspective,” he explains.
By method of instance, he explains that, earlier than the Legg Mason acquisition, Franklin Templeton acquired a US non-public credit score enterprise referred to as Benefits Street Partners. However, this agency is “very US focused”.
“There is strong demand in Europe and UK and elsewhere for private credit,” he notes. “It is no secret that if a good private credit shop came along that was focused on those markets [we would be interested].”
However, he provides that he felt the agency was “probably done” with the very massive acquisitions.
Tokenisation and personal markets
Looking to different future developments inside the agency and wider trade, Gilbey says “one of the greatest challenges” is the best way to carry “a range of alternative strategies in a structure that’s designed for retail investors”.
One answer the agency is taking a look at globally, and has already launched within the US, is tokenisation.
Gilbey says blockchain know-how might “remove expensive inefficiencies in the operational value chain”, and “allow the investors with smaller amounts to access the underlying assets”.
“I think it’s incumbent upon us to globally come together and understand the learning from that. And the application of that for other markets,” Gilbey says of the US launch.
The UK nation head additionally mentioned the Long Term Asset Fund (LTAF) was “a good example of a solution that is gaining momentum”.
“It’s remarkable how quickly the industry and government has come together on this one to bring to the market a structure in record time – it’s almost happened too quickly, I think, for the fund industry,” he provides, noting that fund homes “typically like to kind of be quite thoughtful of these things, and work these through quite methodically”.
When requested concerning the position of funding trusts in offering entry to those markets, he says he thinks there was a “reawakening of interest” within the car.
The agency has two funding trusts, the well-known Emerging Market belief (TEMIT) and the Martin Currie Global Portfolio. He notes these had been seeing a “pick-up in demand over the last 18 months”.
“There’s a couple of private equity strategies we’re looking at globally, when we are asking the question is an investment trust the right vehicle to bring that to bear for UK investors,” he provides.
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