富蘭克林資源 (BEN) 2013 Q3 法說會逐字稿

Good afternoon, and welcome to Franklin Resources earnings conference call for quarter ended June 30, 2013.

My name is John and I will be your conference operator today.

Statements made in this conference call regarding Franklin Resources, Inc.

which are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements involve a number of known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from any future results expressed or implied by such forward-looking statements.

These and other risks, uncertainties and other important factors are described in more detail in Franklin's recent filings with the Securities and Exchange Commission including the Risk Factors and MD&A section of Franklin's most recent Form 10-K and 10-Q filings.

(Operator Instructions).

Now I would like to turn the call over to Franklin Resources Chairman and CEO, Mr. Greg Johnson.

Mr. Johnson, you may begin.

Hello and good morning everyone.

Joining me is Ken Lewis, our CFO.

Hopefully you all had a chance to listen to the commentary we made available earlier this morning.

But to quickly recap, we are pleased to report another strong quarter of operating results despite the headwinds that arose during the quarter.

Long-term net new flows were $7.4 billion and operating income was a record $772 million.

Importantly.

overall investment performance remains strong.

Now we would like to open it up to your questions.

(Operator Instructions).

Michael Kim, Sandler O'Neill.

Good morning.

First, Greg, I know on the prerecorded call you talked about the outlook for maybe a gradual shift in favor of equities and you spent a fair amount of time walking through the differentiating factors for your global fixed income franchise assuming rates continue to rise.

But just wondering if good walk-through your thinking as it relates to maybe a potential trade-off playing out between maybe a step up in demand for some of your equity income strategies versus high redemption risk on the fixed income side of the business?

Well, I think you probably summarized it correctly.

One, the great rotation, I mean I think first of all, you have to remember that buyers prefer fixed income for specific reasons on per equity and some of the different time horizons and demographics are shifting.

So it is not just all of a sudden you move from fixed income to equities.

But you will see a shift certainly on the margin and I think like most right now, with equity stronger, we are still seeing increased interest on the equity side and certainly with the hybrid funds that have been stronger here lately and continue to grow in interest as a way to participate in a little bit of both.

And that may be a nice entry point.

But I think as far as the fixed income investor that is afraid of duration, you are probably going to see a great rotation more into shorter term money funds.

And I think you are seeing that happen.

And then maybe over time, that could rotate into equities.

But I don't think it is just as simple from a fixed income jump into equities.

But with that said, I mean at the end of the day looking at the fear of rates going up and where else can you put your money with interest rates this low, I think it has to be a bullish case for equity, certainly here in the short run, that that should continue to grow with less alternatives.

And as we mentioned, looking at our fixed income franchise, global bonds, if anything this rise in rates highlights how duration risk is not as sensitive to this portfolio.

And we have always talked about it as more an alternative category.

Currencies are going to be the main drivers of alpha and not interest rates, not duration.

And having a 1.5 year maturity in those funds has served it very well.

So we have been positioned for this with the majority of our fixed income assets.

But the other one, certainly munis, anything of longer duration will continue to be under pressure.

And second question for Ken.

You mentioned on the call and expected sort of seasonal step up in expenses looking out to the fiscal fourth quarter.

So just wondering if you could maybe give us a little bit more color in terms of the step-up maybe on a percentage basis year over year, or in terms of absolute dollars, anything incremental.

Well, the best estimate I guess is -- I wouldn't put too much confidence on the accuracy, but a couple of things that I think are worth highlighting.

On the comp side this quarter, we are probably about -- the variance, about $10 million, was due to a couple of things.

The first one was the payroll taxes and that decreased.

But then also a large part of the variance this quarter was due to the reduction in valuation of the long-term awards for our employees that are a function of either mutual fund prices or BEN.

So that kind of gives you some color on the comp line.

The other expenses, I guess my best guess is about 1% or 2% up for the quarter, but that -- as I mentioned that is just seasonal adjustments.

That's helpful.

Thanks for taking my questions.

Bill Katz, Citi.

Maybe, Ken or Greg, in your prepared remarks in the prerecorded call you mentioned that your payout ratio relative to repurchase and dividends were a little bit low this quarter.

Wondering, given the split, what your thoughts are in incremental repurchase versus dividends at this point in time?

Can you repeat the last part of that question -- sentence?

Just what your priorities are for free cash flow, given that the payout on earnings was a little bit soft this quarter?

Yes, I wouldn't say that you are going to see a big change in our strategy.

I think it is reasonable to assume, given the stock valuation, that in the short term we are going to see a pickup in share repurchases.

But overall no real change.

Okay and second question is you called out both some wins and some losses on the equity side of the portfolio.

Could you give me maybe a couple of sentences on the details behind those lumpy account wins and losses?

And then maybe more broadly what you are seeing in terms of the institutional pipeline for new business into the new quarter?

Yes.

We had, there was one large insurance redemption that affected three retail funds that was about $1.6 billion and $720 million was in mutual shares, $500 million in Templeton growth and $500 million in the income fund.

So that was the large one that went out there.

And then we had some larger wins on US fixed in Taiwan and other -- and then some large additions to existing accounts in Asia as well.

One into a Chinese mandate and other, a Shariah mandate.

But other than that nothing, I think just more in to the [$100 million to $200 million] in and out range.

Those were the larger ones.

Right.

And broader question just being -- I'm sorry I'm asking questions here, but the broader question is in terms of the pipeline into the new quarter, what are you seeing in terms of demand?

Well, I don't think anything.

The pipeline looks strong and we have had some nice fundings already to date in the new quarter.

So I don't think anything has changed from the disruption in the market.

Okay.

Thanks for all of my questions.

Dan Fannon, Jefferies.

You mentioned on the call that redemptions in July broadly subsided.

I guess, if you could talk about the gross sales aspect of that as well as if it was the same funds that were heavily being redeemed, if there has been any change in terms of demands.

Just on a more shorter-term basis.

Well, again, I will speak in generalities because that is what we do as far as the forward quarter and what is happening now.

And like the market, when things settle down, obviously, the spike in rates and how that affects the longer duration funds, I mean I think those continue to be under pressure.

Municipal bonds because they have kind of been in a perfect storm as far as policy and some problems in the market with Detroit, obviously, that that continues to put pressure on the municipal bond market.

But, overall I think the funds that had the highest redemptions and for us on the equity side was the Asian growth funds.

So as things settle, that tends to be a fund that comes back faster than others and tends to -- in redemptions increase pretty quickly when you have a selloff in those markets.

So that would be one.

In global bonds on a relative basis, again, you had the backup, but we have had excellent performance and very strong prior month for that strategy.

So I think that that helps that hold assets and stem redemptions as well.

Great.

And another question on the buyback, is there anything that happened in the quarter?

Were you restricted at all as to why if we look on a historical basis, the number is either this quarter even kind of year to date look lower than previous?

No, nothing really important to highlight.

I think I mentioned maybe it was a little misunderstood last quarter, it's tough -- sometimes it is tough for us to execute our plan.

But it is not a change of philosophy.

Great.

Thank you.

Michael Carrier, BofA.

One follow-up on the fixed income in business.

You mentioned a pickup in redemptions.

I think you said maybe 50%.

Not wanting to focus too much on like month-to-month, but did we see that same level of moderation in July?

And, Greg, when you think about the longer term, it seems like when you guys give the description of the fixed income business in terms of global focusing on currencies and credit, less rate expose.

All that makes sense.

I'm just trying to get understanding from a client standpoint.

Are you seeing a decent amount of differentiation among fixed income products?

And maybe it is just too early to tell, but it seems like all of those are setting up in the relative performance for Franklin to stand out well.

But I think there's the issue or the risk that just fixed income gets painted as an asset class.

I just wanted to see if you are starting to see some differentiation there.

I think that the answer is yes.

I think you are absolutely right that it does get painted as fixed income and probably a lot of investors feel that they have more exposure to rising rates than they do.

But the other point is that in that fund, when you have a selloff of risky assets and a stronger dollar that we have had, that is going to put pressure on that fund as well.

So those are other factors that happened in that time period.

In a flight to quality, it is just as much as rising rates it will put pressure on the global bond strategy.

But, we do think it is a nice way to diversify a portfolio.

And I think you are absolutely right that it will be highlighted by the relative performance going through this cycle versus some other funds that have that longer duration.

But it remains to be seen how quickly -- and we have seen, we went through this cycle before, but the difference this time is that we have had very strong performance through it where the other one we had short-term underperformance.

And I think that that strong relative performance should create stickier assets pretty quickly.

Okay, thanks.

And just as a follow-up.

You mentioned on the prerecorded comments just on Mutual Series, some of the dip in the short-term performance, given their strategy.

Anything of concern there?

Or is it just as you said the typical strategy?

When the markets are going up, they don't want to underperform, but over time you expect that to pick back up?

Yes.

To me it is really more about how Lipper and how they are measured against a peer group in the S&P and, historically, the Mutual Series funds.

One, they have always owned a fair amount of cash relative to -- and that is part of their strategy how they buy in dips and they have exposure to Europe in many of the funds and that exposure has not served it very well versus the US.

And certainly with a stronger dollar that is another -- creates a little bit more of -- more headwinds.

But more recently, Europe now is starting to outperform, had a very strong July.

That has helped Templeton and Mutual Series.

So I think it is -- for us, it is always important to just talk about the philosophy and how they run money.

And it doesn't fit neatly really into any bucket and sometimes you will have underperformance.

But if there is nothing there that is inconsistent with how they built their returns over time, it is just cash in Europe and that is what we have always had in those funds.

Okay.

Thanks a lot.

Craig Siegenthaler, Credit Suisse.

Good morning.

Just a follow-up on the $1.7 billion redemptions from the US Life Insurance Company.

Can you help us provide any other reasons behind why they were redeemed?

And why was there three different strategies?

Yes, I think if you look at that entire business and the variable annuities that went -- having gone through the drop in markets 2008, 2009 and how they price and have to prepay commissions and then earn those back over time, that there is a big risk to the insurance company if they can't measure and hedge.

So you have any active manager that doesn't fit neatly into a way to hedge that risk has had challenges.

And that is why the managed volatility funds have done much better and taken up some of the slack in that product and that area hasn't been the kind of growth that it has had for that reason.

So, for us, it wasn't really a performance issue.

It was more about the insurance company changing how they manage their risk overall and that active managers have been under pressure there.

Got it.

Thanks for the color there.

And just one follow-up.

You closed international small-cap growth in different (technical difficulty) this quarter.

I'm wondering are there any other very successful strategies that could be close to either a soft or hard close in the coming quarter, say, that we should focus on.

No.

I think those were the two that have grown quite a bit.

We told the market as we raised capital in those funds that at some point they would be closed.

But I don't see anything else right now that is nearing that decision point.

All right.

Great.

Thanks for taking my questions.

Chris Harris, Wells Fargo.

In your prepared comments, you mentioned a little bit how fixed income markets tend to be self-healing over time.

Just wondering if you can maybe expand on that topic a little bit more and really wondering how maybe in prior cycles how long it took for investors to actually come back to the fixed income class as interest rates were rising.

Yes.

I think it is important again to go back to why people invest in fixed income and the difference of equities.

Equities tend to look backwards on performance.

Fixed income somewhat backwards, but also you have this dividend yield -- or you have the current yield which is there every day and attracts new buyers.

Take municipal bonds.

A very inefficient market in terms of liquidity sometimes and you get very strong relative yields when you have market disruption.

That attracts an entire new buyer into munis and it is the same fixed income.

You want to match liabilities.

As rates go up you have new buyers that will do that.

So, I think that is a big difference.

Now, if the perception is rates are going to continue to rise every day, then that is a little bit different.

But remember, it kind of steps and you will have periods where that is the best guess of where the market is at that point and people get attracted to higher yields as they go up.

And I think that is very different than equities which has more of a psychological effect and net negative news coming every day on economic growth and things tend to put a damper on that.

So, I think it is a very -- it is just very different and fixed income has a very steady fire that tends to always be there.

Okay, follow-up question then on the equity side of the business.

The last couple of calls we had talked about financial advisors being a little bit slower to come back to the Franklin product.

I am wondering if that behavior has changed at all, whether you are starting to see a little bit more uptick by financial advisors selling your products.

Well, I think we are.

I think certainly some of our funds continue to do very well.

And as I mentioned, anything for a little bit of yield or hybrid is doing very well.

We have a Templeton Global Balance Fund which is new and was up 50% this quarter.

Had very good relative performance.

Again a nice way to get a little bit of the global bond side plus some of the Templeton Equity in that.

So you are seeing this hybrid balance category continuing to grow.

And that is again as investors want to get more equity exposure our Rising Dividends Fund continues to be a top seller for us on the equity side.

So, I think we are still very encouraged on equity flows and I think, again, like the industry in the past month or so, are doing better as well.

Luke Montgomery, Sanford Bernstein.

Good morning.

Templeton Global Bond Funds, predominantly been a retail product.

I think historically the international bond asset class hasn't been a mandate institutions look to fill.

I have been hearing that, but it is changing a bit and you mentioned you can position it as an alternative strategy.

So, I was wondering if you might comment on the institutional demand for the product and whether you think that could bring in some more strategic funding to the strategy.

Well, it could.

I still think our Emerging Market Funds are an institutional category that we do fairly well in the marketplace.

Global ags, the Other, so, those are categories that we are very active in searches and have said on many calls in the past that is an area where we think we can still get a lot bigger.

So we are getting wins.

We had some nice institutional wins here over the last quarter in that area; and I think it will be -- continue to grow.

Okay.

And, Greg, you have taken over the Chairman role I think some in the press and a few investors have asked why the Firm didn't take the opportunity on Charles's retirement to consider maybe separating those roles.

Perhaps just a comment to put that decision in the context of the Firm or the Board's philosophy on corporate governance.

Well, I think it, again, that is something the Board felt comfortable doing.

I think it's certainly a factor that was considered in the decision, but we just think this structure is really aligned with shareholders and that there is no real issue there.

All right.

Thanks for taking my questions.

Brennan Hawken, UBS.

Good morning.

So, really helpful to hear about Global Bonds direct exposure there particularly the US rates being limited.

This quarter it seemed though definitely currency movement for performance and currency movements are clearly impacted by rates.

So is it possible to give investors color around how you guys view and manage that risk and how investors should think about it?

Well, I think there's many factors in what moves currency.

And I think if you listen to our portfolio managers, they would say that probably duration loss is more permanent today than currency loss.

And I mention that flight to quality, that a lot of money goes to -- moves out of the emerging market currencies for a few factors obviously over the last month.

And that is similar to what we saw in the last selloff, but the difference with currencies is if the long-term trends are in place you'll get that loss back where, I think, the interest rate losses are more permanent in nature.

It is going to be very difficult to have rates swing back down.

But, I think you are right.

I mean there's factors to consider, but it is relative rate moves by country, not overall pressure on rates moving up.

And I think the other point with currencies is that unlike equities you don't really rely on economic -- of course, you do economic growth is important, but it is relative economic growth.

You can still get alpha on a relative basis by just picking the right currencies, where fixed income you need rates to stay stable or go down.

You are dependent on that and equities are dependent on overall economic growth and growth of earnings.

So I think that that is a distinction that certainly in this market where there's headwinds on the Other side that is attractive to people.

Okay.

Thanks for that.

And I also noticed that the proportion of US cash ticked up here versus last quarter.

I think it is at 38%.

I think I saw it at a Q now.

Is there a number that you want to drive that to, or do you think it nothing about it in proportional terms, but rather in absolute terms?

Can you help us maybe think about how you are viewing that?

No, that's right.

We do think about it in absolute terms.

And it is not something that is a target.

It is obviously something that we monitor, but in absolute terms, the pie is getting bigger and there is enough US cash to meet our needs.

Ken Worthington, JPMorgan.

Good morning.

First, just to call out Global Bond one more time.

Is the franchise in redemption in July?

I think it was in redemption in June.

And your comments on the prepared remarks and to other people suggested that the -- at least the growth redemptions have slowed.

But I couldn't tell if that net had turned positive or not.

Well, that means I gave the correct answer.

We don't really talk about specific flows because I think we don't want people to make that assumption that just because you are in a shorter period one way or another that that is where we are going to end up for the quarter.

So I think I am going to have to leave it that it's still under pressure, but better and not get into exactly where we are today on that.

Okay.

Thank you.

And then maybe to follow up on Craig's question earlier.

Can you talk about the variable annuity business you have?

How much AUM do you have under management?

And maybe to what extent are those assets at risk given the low vol strategies being employed by the life insurance companies?

Yes, I don't have that number in front of me.

Probably our Investor Relations could get that for you.

I just think it's the pressure that is there, but I think it doesn't cover all of the assets and certainly some, many insurance companies are comfortable with their hedging strategies on existing active managers.

This is just by group.

So I -- we can give you more color through Relations, but I don't have much here on that.

Okay.

Thank you.

Matt Kelly, Morgan Stanley.

Good morning.

I was just hoping if you could -- going back to two questions ago if you could simplify for us what portion of your -- roughly what portion of your cash flow from operations is coming in the US versus international currently and how you think about how much capital you are returning to shareholders of the US cash flow?

I will start with the last part of that question.

We look at the overall Company's earnings and that is our payout ratio.

I mean, we do point out that dividends, taxes, et cetera, share repurchase come from the US cash.

Roughly I think it is probably 60% non-US generating, but that is kind of a guess anywhere from 50% to 60%.

And obviously the non-US cash component is growing.

But we are going to continue to kind of maintain a capital policy that has been consistent with our historical.

I don't really see any change to that.

Okay and then switching topics a little bit.

I wanted to get a sense from you guys as to how the K2 acquisition has gone.

If you could tell us what your end of period assets are on the K2 platform and how your flows are trending and what opportunities you see there.

Yes, I think the integration is going well.

One of the important points of the K2 is their process and their transparency and I think some of our clients are finding that attractive.

There's been a lot of cross-selling activity going on and it is just everything is on track.

Greg, do you want to add anything?

Yes, I think we have spent the last few months really educating our sales force and we have seen the result already with increased RFPs and actually had a few wins to date from clients that are Franklin Templeton or had been existing clients.

So for us the next step is the retail side and we are in the process of getting that ready.

It is a new product area for us.

One that has taken a lot of, I think, pre-work but we are getting close to offering a -- there expertise in a [40-F] Fund.

Great.

Thanks for taking the questions.

Robert Lee, KBW.

Good morning.

Maybe going back to the capital question and I guess understanding that you guys have always liked to run conservatively with a lot of excess capital and different operating subsidiaries.

And taking into account that a lot of your cash is offshore, is outside the US and is also being generated there.

But as that continues to grow the non-US cash and that part of your business grows faster, how is that influencing how you are thinking about using cash in the US?

Obviously you return most of your US earnings through dividends or share repurchase, but how about -- because at some level the cash held somewhere outside the US is available in, quote, an emergency.

So as those levels have built -- is there any thought to maybe thinking that gee, I can bring the US held cash down to lower levels?

Because I still have -- and maybe that translates into some increase buyback or what not.

Just trying to get a feel for as the dynamics of the business shift how that is impacting your thoughts on capital management.

Sure.

Well, first, I would point out we did add a little disclosure in the Q this quarter about kind of -- we have always disclosed our discretionary uses for both US and offshore cash in terms of seed capital and all of that.

And now we have added what is required by the regulatory and other external factors [for sale].

You can get a better feel for that.

I think it is something that we monitor.

We know -- I don't think it changes, like I said, it doesn't change our approach.

We still think there is a lot of opportunities to use offshore cash and new product development is just one example of that.

But looking forward, the business changes.

The business change and we have done this in the past.

We have taken advantage of the way products are managed changes and whenever we see an opportunity to bring back US cash we do so.

The other thing to factor in is we always bring US cash back that has been previously taxed in the terms of interest earnings.

So that is a factor that helps out the equation as well as we earn money on the offshore cash and we pay tax on it, we bring it back.

So that is something that might be overlooked.

Great.

That was helpful.

Secondly, maybe going back to some of the expense side and I mean understanding there is some seasonal increases coming, but in general, I mean I guess there has been some pretty steady step-up in whether it is G&A and maybe some other places.

Understanding you're investing globally, but are there any specific projects or initiatives underway that's going to maybe keep some of the pressure on?

I mean, I know you put in place that new global shareholders servicing platform.

I don't know if -- I mean, are there any legacy [quotes] related to that or are you starting to see that actually sort of having a positive impact on your expected expense growth?

I think -- I don't think there is anything -- there is nothing on the horizon that I can see that would be that would drive up expenses materially.

We haven't talked about the sales and distribution expense but we did add a little a schedule and the back to give you an idea of what the net distribution expense is by both asset and sales type.

And that might give you some insight as to operating margins and the various expenses we have from distributing the products.

There is nothing, I just said, no major products that I can think of going forward.

But we do expect to leverage some of the investments we have made like the [repo] platform and the low -- and our centers in the low-cost jurisdictions.

So, I think that the work that we have done in that area offsets any incremental new spending initiatives that we have and that is what you have seen in the past.

We have probably ramped up in the last couple of years.

I don't know that that level of spending will continue in the future.

We are having budget talks right now and trying to slow that down a little bit.

So more to come on that.

Great.

Thanks for taking my questions.

David Chiaverini, BMO Capital Markets.

Good morning.

Wanted to follow up on the payout ratio.

Looking over the past going back to 2001, the average payout ratio combined is 78%.

Do you -- you mentioned about getting back to historical numbers.

Should we imply that you are going to get back to 75% to 80% payout from here?

Yes.

So, that is -- we don't focus on that as a target.

We are just trying to give you guys some general idea.

But I think that number is probably a little too high.

I think when we are talking about historical, we might be talking about more recent historical experience, and that is more like 60% to 65%, or 66%.

Got it.

Thank you.

Douglas Sipkin, Susquehanna.

Thank you and good morning.

Just wanted to drill down a little bit on Templeton Equity.

And I am just curious, obviously the near and intermediate term is really, really good.

I guess the very long term is still a little bit lower.

I am just wondering are there any platforms out there still penalizing you guys for the very, very longer term, i.e., is there an opportunity to gain some platform market share with Templeton Equity, given their very strong performance over the last five years?

I think every day the performance improves of the -- obviously, the probability of improving your share and platform improves as well.

And I think if you look today, one, three and five year for Templeton now is very strong.

10-year is still lagging, but 10-year is a little less important than three- and five-.

So I think as we have said again in past calls it has been a focus of ours to -- it is a flagship franchise in global equities and we want to make sure it is right up there with everybody's first choice.

So, I would expect that to increase again.

It just has taken a bit longer than we would like.

I think there's also some people specializing; we have seen places like Asia Growth Frontier Market's, more specialty China fund; as people look to global equities, there's more differentiation, I think, than in the past and maybe that doesn't fit exactly neatly into the Templeton strategy, but we feel like it is a big -- growing an important place for us.

It is going to continue to be a place for focus for the Firm and I think we -- our expectations are especially after the very strong July that it will continue to be a focus for us.

Great.

And a follow-up on the balance which continues to be very strong.

I know you guys touched on it in the prepared comments about the Global Balance product.

Can you maybe put a little bit more parameters around that, the size, the opportunity, et cetera?

Thanks.

Yes.

I think in our terminology you might be referring to the hybrid category.

That —

Yes.

That's correct.

Another product of the Templeton Balance Fund that Greg mentioned.

Yes, it is just the demand for having a little bit of both that the to complement each other very well.

The markets now very familiar with both strategy and demand has been there to combine the two.

Again, a way for the somebody who is a little bit not comfortable moving 100% maybe into global equities.

It is a way to get their toes in it with a percentage in that.

So that is just an area like all hybrid we have seen increased retail demand.

And I think that is going to continue.

Gregory Warren, Morningstar.

Thank you for taking my question.

You guys touched on this briefly in your prerecorded call on the Mutual Series being down from performance level.

But it is pretty dramatic from what we saw at the end of March to the end of June.

And it just seems like it has got to be more than the large-cap value or value being out of favor and perhaps carrying more cash.

Then I just had a follow up on Templeton as to is there anything you feel you can do additionally to really generate sales within that channel?

Because it seems like it is ripe right now, that part of the market.

Well, again, I think Mutual is the -- couple of things.

The deep value will continue to underperform in a rising market and that is consistent with how they operate.

I think you have had the headwind of a strong US dollar for their European holdings and then you had a very weak Europe during that period which a lot of that, certainly Europe is reversing and I would expect that to look better more in the near term for their results.

But nothing, those are -- that's enough to knock you out of your box on a relative basis over the last four or five months.

So it is very consistent with how they operate in the holdings.

There is nothing -- no bets there that look like that would have contributed to underperformance when the stock picking continues to be strong.

I think Templeton -- it is a focus.

It has been a focus for us.

We talk about it quite a bit; and we do think it is probably one of the best near-term opportunities we have in terms of those flagship funds getting the attention they deserve in the retail channels.

We are going to keep pushing that.

But it has been frustrating.

But, again, as those longer numbers get better, that is going to make it just that much easier.

Okay.

Do you feel like there is some hesitation on the part at least in the advisor channel to put people into more active equities and it is just a safer bet to put them into passive right now?

I don't think that is the case with Global Equities.

I think possibly a little bit more with US, but on the global side I think active managers continue to do well.

I just think there's just more demand for more satellite type offerings and with on the retail side of regional funds and versus your just big global equity funds.

You know, that's -- but our focus has been also to talk about global equity as a core -- as the core holding and then build and differentiate your holdings around it instead of just having the big US large-cap value or growth, but starting with Templeton.

Starting with the growth upon -- and I think that that is making progress as we see global equities continue to dig into share.

But certainly US has been the strongest market here in the last few years.

So that is not really helping that.

But it -- performance eventually is the lead and that looks good.

So I think that we are optimistic.

Okay.

Thanks for taking my questions.

Jeff Hopson, Stifel Nicolas.

I may have missed this, but have you in terms of the global fixed higher redemptions, have you made any comment about the geography or distribution channel?

Anything that, in June in particular, as to where some of the higher redemptions came from, anything that may be striking as to potentially being the indicator of future flows.

And then in terms of the some of the new disclosure, one of the pages said that 11% of the sales are commissionable sales, I guess, which seemed low.

Can you comment on that as far as what's driving that in terms of movement to fee-based plans in the US, but also geography?

And where would that number have been a few years ago?

Yes, that number really hasn't changed for us.

We started to see changes, whenever, 10 years ago, perhaps and that number coming down, but it has been relatively stable for us.

It doesn't changed that much.

And that is the commission part of the question.

But I think you're right.

That number there is a movement around the globe and with things like the RDR and moving front end and even banning front in commissions.

So you would expect to see that number lower and lower over time and more of a wrap approach.

We haven't given any color, I think, on just trends around global bond redemptions because I don't think there is much to offer there.

I think it is fairly spread across no one area is a whole lot heavier than another as far as US versus international or Europe versus Asia or anything.

It just seems to be fairly spread across the board.

Okay.

Thank you.

Roger Freeman, Barclays.

Good morning.

On the duration differential and Global Bond.

Do you -- has that been pretty consistent over time?

I forgot what you said on that and did it decrease at all this past quarter?

I know it has been the theme of that management team that they were concerned about rising rates and we were at a historically low level.

I don't have the exact numbers as far as whether that has decreased over the last year.

So I know it has been on for at least a few years and it has been headwind and performance over that if you look at it over the three- to five-year period when rates dropped that Fund from that standpoint from attribution.

It was relative weakness against this peer group and the difference today is it is helping.

But I don't know if it has been -- if they have lowered that over the year or not, but it has certainly been the positioning of the Fund relative to its peer group for a long time.

Okay, thanks.

Then US Equity, I think you had said in the prerecorded call that the flows would have been positive X3 redemptions.

There are just -- how much -- can you quantify how much those 3 were basically a little over $1.2 billion to get back over (multiple speakers) — ?

That's -- I mentioned those, just two of them that come to mind.

You had over -- you had about $720 million with that insurance reduction from mutual shares and $512 million from Templeton growth.

So those were two large ones and then the other one was (multiple speakers).

Right, okay.

Thanks.

We have no further questions at this time.

Well, thank you for participating on the call and we look forward to our call next quarter.

Thank you.

Thank you, ladies and gentlemen.

This concludes today's conference.

Thank you for participating.

You may now disconnect.