Franklin (BEN) Concludes O’Shaughnessy Asset Management Buyout

Franklin Resources, Inc. BEN completed its previously announced acquisition of O’Shaughnessy Asset Management, LLC (“OSAM”), a preeminent quantitative asset management firm, thereby reinforcing its position in the separately managed account (SMA) space.

Post-acquisition, OSAM continues to retain its brand, while more than 40 of its team members have joined Franklin. Also, OSAM’s intellectual property, investment management processes, and principal business assets have been transferred to Franklin’s Product Solutions division.

Through the acquisition, the company will leverage OSAM’s factor-based investment management and custom indexing solution capabilities via the latter’s popular flagship Canvas platform. Since the Canvas platform was rolled out in late 2019, it has seen robust growth, with $2 billion AUM of OSAM’s aggregate $6.5 billion AUM as of Nov 30, 2021.

Encouragingly, Canvas facilitates financial advisors to build and manage Custom Indexes in SMAs, which are curated per clients’ particular needs, preferences and objectives. The platform also allows advisors to create investment templates, utilize passive strategies, access factor investing strategies, and apply ESG investing and SRI screens in accordance with clients’ personal beliefs.

It will also enable advisors to aptly plan, finalize tax budgets, zero in on realized and unrealized gains and losses, and sell certain positions to create offsets. Canvas platform aside, OSAM’s foothold in factor-based investing will also benefit Franklin.

While Franklin is already one of the largest providers in the SMA industry, with $130 billion assets under management (AUM) as of Nov 30, 2021, the buyout will add to its SMA offerings.

Management remarked, “Custom Indexing is aligned with our commitment to bringing sophisticated customization to a broader investment audience. This partnership enhances our ability to deliver compelling individualized SMA solutions to clients, advisors and firms.”

Over the last couple of years, Franklin has grown through acquisitions, thereby enhancing its foothold. Such acquisitions will support the company in improving and expanding its alternative investments and multi-asset solutions platforms, which will help it provide world-class investment solutions to clients.

Notably, in November 2021, Franklin inked an agreement to acquire Lexington Partners, a domineering secondary private equity and co-investment funds’ global manager. The deal will fortify Franklin’s alternative asset competencies apart from complementing its current prowess in real estate, private credit and hedge fund strategies. It comes at a time when investors are progressively stipulating capital across the huge arena of alternative asset offerings.

However, overall high net outflows will likely keep the AUM balance under pressure.

Shares of the company have gained 8.2% over the past six months compared with 4.8% growth recorded by the industry.


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BEN currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Inorganic Growth Efforts by Other Firms

Several other companies from the finance sector are undertaking consolidation efforts to improve competencies in a bid to counter the low-interest-rate environment.

In a similar move to enhance M&A advisory service competencies in the digital-infrastructure sector, Citizens Financial Group, Inc. CFG announced a definitive agreement to acquire substantially all assets of DH Capital LLC. DH Capital is a New York-based private investment banking firm catering to companies in the Internet infrastructure, software and next-generation IT services, and communications sectors.

The move marks Citizens Financial’s third acquisition over the past four months to augment its corporate advisory team. In September, CFG closed the buyout of Willamette Management Associates and it acquired JMP Group in November.

Velocity Financial, Inc. VEL acquired the majority stake in Century Health & Housing Capital. Century is a licensed “Ginnie Mae” issuer and servicer. Century offers government-insured Federal Housing Administration (FHA) mortgage financing for multi-family housing, senior housing and long-term care/assisted living facilities.

The acquisition will help Velocity Financial leverage Century’s well-established platform and diversify Velocity Financial’s revenues with the addition of fee-based origination and servicing income. The buyout adds new products. This along with Velocity Financial’s national origination footprint offers ample development scope for origination growth and the expansion of commercial mortgage product offerings.

RBB Bancorp RBB entered a definitive agreement to buy Gateway Bank in a cash transaction valued at $22.9 million in a bid to penetrate the strategic San Francisco Bay Area. The buyout will expand RBB Bancorp’s physical presence in six of nine target markets of Gateway Bank and provide a profitable base to extend the advancement the latter has made in the Bay Area. It is also in line with RBB Bancorp’s aim to establish its relationship-based banking model in the region for the community.

As of Sep 30, 2021, Gateway Bank had total assets of $172.4 million, total gross loans of $123.1 million, total deposits of $147.5 million and total tangible equity of $15.5 million. Hence, the acquisition is likely to enhance RBB Bancorp’s balance sheet.

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Franklin Resources, Inc. (BEN): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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