Why Franklin Resources' Stock Price Dropped 30.4% in the First Half | The Motley Fool

Asset management firm Franklin Resources (BEN 2.10%) watched its stock price tumble 30.4% in the first half of 2022, according to data from S&P Global Market Intelligence.

The asset manager lagged the S&P 500, which fell 21.6% year to date through June 30, and the Dow Jones Industrial Average, which plummeted 15.3% in the first half of the year.

Franklin Resources, the 12th-largest asset manager in the U.S., fared about as well as other asset managers in the first half, given the market conditions. With the overall market dropping into a bear market, a company that runs mutual funds and institutional investments is going to see its asset levels drop in concert with the market. That, in turn, leads to less revenue via fees, which are based on asset levels, and lower fund flows.

Franklin Resources, the holding company for Franklin Templeton Investments, among other fund families, saw its assets under management drop about 8% through the end of May to about $1.4 billion. That is actually not as bad as the drops for many of its competitors, mainly due to the fact that it has a higher percentage of its assets in fixed-income investments, which didn't decline as much as equity funds. Also, it posted asset gains in alternative investments.

Also, Franklin made two acquisitions in the first half of the year to bolster its growing alternative investments business. In May, it announced plans to buy Alcentra Group from BNY Mellon (BNY +0.00%) to enhance its European credit capabilities, and in April it closed on its acquisition of Lexington Partners, a global manager of secondary private equity and co-investment funds.

Franklin Resources has a fairly balanced mix of assets, both in terms of equity to fixed income and alternatives, and between retail and institutional. That mix may hamper its ability to grow as high as others during bull markets but serves it well during bear markets.

Also, it should be noted that Franklin Resources is a Dividend Aristocrat that has increased its dividend annually for the past 40 straight years. In June it declared a $0.29 quarterly dividend, which represents a 4% increase over the same quarter a year ago. Franklin is a good, cheap dividend stock, but given the outlook for the market, probably wonʻt generate much in the way of returns, at least in the near term.