Investment manager Franklin Resources (NYSE: BEN), better known as Franklin Templeton, swung to a fourth-quarter loss on Monday as a $389.2 million impairment charge related to its Western Asset Management unit overshadowed higher management fees.
WHY IT’S IMPORTANT
The unit, which chiefly manages fixed-income portfolios, has been under investigation by the U.S. Securities and Exchange Commission and the Department of Justice over certain trade allocations related to treasury derivatives.
In August, Western Asset had said its co-chief investment officer, Ken Leech, received a Wells notice from the SEC and was on a leave of absence.
A Wells notice is issued when the SEC is planning to bring enforcement action, but it does not necessarily mean the company has engaged in wrongdoing.
The Commodity Futures Trading Commission, which regulates the U.S. derivatives market, is also conducting a parallel investigation into the trades, Franklin disclosed on a post-earnings call.
BY THE NUMBERS
Franklin Templeton said the $389.2 million impairment charge was tied to certain mutual fund contracts managed by Western Asset.
However, the company’s total investment management fees, which is the largest contributor to Franklin Templeton’s total operating revenue, grew 8% to $1.77 billion in the fourth quarter from a year ago.
It reported a loss of $84.7 million, or 19 cents per share, for the three months ended Sept. 30, compared with a profit of $295.5 million, or 58 cents, a year earlier.
Excluding one-time costs, Franklin Templeton’s quarterly profit fell 3% to $315.2 million.
MARKET REACTION
The company’s shares fell 2.45% to $20.32.
(Source: Reuters)
