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Franklin Resources Inc. (NYSE:BEN)
Q1 2020 Earnings Call
Jan 30, 2020, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Unidentified Speaker

Good morning, and welcome to Franklin Resources' Earnings Conference Call for the Quarter Ended December 31, 2019. 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 in the Risk Factors and MD&A sections of Franklin's most recent Form 10-K and 10-Q filings.

Operator

Good morning. My name is Kevin, and I'll be your call operator today. [Operator Instructions]. At this time, I'd like to turn the call over to Franklin Resources Chairman and CEO, Mr. Greg Johnson. Mr. Johnson, you may begin.

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

Hello, and thank you for joining us today to discuss first quarter results. With me is President and Chief Operating Officer, Jenny Johnson who will be assuming the role of CEO next month and Matthew Nicholls, our CFO. Financial results improved this quarter reflecting strong financial markets and our ongoing commitment to effective expense management, which drove improved profitability.

We continue to experience outflows this quarter for reasons discussed in the commentary we released earlier this morning. But we are encouraged to see traction in several important initiatives, including our efforts to expand our multi-asset solutions and ETF businesses. We also believe that our balance sheet is one of our most under-appreciated assets as we evaluate opportunities to accelerate growth.

Earlier this month, we announced plans to acquire two companies that will expand Fiduciary Trust's assets under management by 50% and expand their physical presence in two important markets. We also returned approximately $260 million to shareholders through share repurchases in our regular dividend this quarter, which the Board increased to $0.27 per share in December.

After more than 15 years, my role as CEO of the firm will come to an end after our annual meeting next month. I'm very confident in Jenny's leadership and vision for the future of Franklin Templeton and together, we are genuinely excited about the opportunities that lie ahead.

While this will be my last call with you as CEO, I will remain Executive Chairman of the Board and will continue to participate on our earnings calls going forward. I'd now like to open the line for your questions.

Questions and Answers:

Operator

Thank you. Our first question today is coming from Ken Worthington from J.P. Morgan. Your line is now live.

Kenneth Worthington -- J.P. Morgan -- Analyst

Great, thank you. So you've done a couple of bolt-on acquisitions in Wealth Management. So a couple of questions around that. So first, why are you thinking wealth management is a good place to invest here? Maybe you can flesh out, are there synergies between wealth threat management and the rest of Franklin and maybe any dis-synergies as well. And then may be cleaning up, I think when you guys bought Fiduciary, I think it's like 20 years ago, I remember it had about maybe $15 billion or so of AUM. I could be wrong, but that's my recollection. And I don't think it's all that much bigger today maybe $15 billion to $20 billion these days for these deals. So it hasn't really grown that much, if at all, over the last 20 years. So, given you're doing a bunch of bolt-ons, how do you expect to do a better job growing these wealth management assets today, than at least my perception of what you've done over the last 20 years?

Jennifer M. Johnson -- President and Chief Operating Officer

I'll go ahead and take that. Today, post acquisition I think Fiduciary is about $29 billion and there's no question, wealth is hard to grow, but it's incredibly sticky, once you have it. And we think that it's both important for us as a firm from a distribution, but also as you're seeing, fee based advisors trying to add more services, you justify basically the fee that their clients pay every month. They're trying to add on more than just investment management.

And so, some of the capabilities that Fiduciary has, we think can be packaged to be able to provide additional services to advisors. For example, in this most recent acquisitions, we not only expanded into two geographies that are excellent geographies to be in for wealth management, but we added services. So Athena Capital is incredibly well known for their impact investing in OCIO.

We think that Dr. Lisette Cooper can be helpful to us in more of the issue work that we're very focused on doing as well as Pennsylvania Trust has special needs trust capabilities, which is essentially helping families who have a child with special needs and not worried about how to care for them beyond the say, the parents surviving, and that's an opportunity of growth. But that also can be something that we can work with our financial advisors as they have clients with those needs. We can bifurcate both the trust administration as well as the investment bifurcate [Phonetic] capability on it.

Matthew Nicholls -- Executive Vice President, Chief Financial Officer

I think I'll just add something to that, it's Matthew. The multiple that we pay for the -- for these businesses is reasonable, we think, and it helps us capitalize on some of the broader expenses that we have embedded within Fiduciary Trust. So essentially by having more assets and clients, it makes our overall wealth business more efficient. This is probably the beginning of our strategy to grow Fiduciary Trust, this is the second leg, if you will. You're right, Ken, it's been a number of years since we've had a growth strategy around it inorganically.

But we -- it wouldn't surprise us if we doubled the size of Fiduciary Trust over the next year or two, by using this strategy.

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

And I would just add, I think we've always had that -- as you know, being on these calls for years, it's always been a goal of ours to -- within our M&A to increase the size, but I think there's just a few more opportunities today with some of the pressure on smaller firms keeping up, keeping pace with technology, spending and services that are required for their investors. So we're just seeing a few more opportunities for roll-ups.

Kenneth Worthington -- J.P. Morgan -- Analyst

Okay, great. And then just really broadly Jenny, you're now officially -- or going to be officially in the role of CEO. Maybe just highlight your priorities for the next two or three years. What are you hoping to accomplish? Any directional changes that is worth highlighting to us? Thank you.

Jennifer M. Johnson -- President and Chief Operating Officer

You know, I think we -- you know, it's continuing on a path that we've been focused on for the last couple of years, which is, we bucket the business and growth opportunities, kind of in three places, so one is just protecting the core and that's making sure that the products and capabilities that we have are best in breed, and if you think about on the investment management side, there has been a lot of focus and efforts around leveraging data science to enhance what we're doing on our core products.

And I think our fixed income team has done some really exciting new things combining active and quant. So again, it's just making sure that you have best-in-breed in your existing core and then from the second category is what we call growth accelerators, things like growing our high net worth business, things like expanding in geographies that maybe we're not as deepened as we'd like to be, adding product capability that maybe were not as strong in or don't have as much coverage. And then also distribution capabilities. So for example, we've always been really under-represented in US institutional that would be an area of interest for us to continue to grow.

And then finally, I think we would all be foolish not to believe that the technology industrial revolutions that's existing today is going to have disruption on our businesses. So making sure that we're investing in things that may be won't be meaningful or material in even the next five years, but that we think could be very disruptive to the business over the long run.

And so that's -- you see some of the investments that we're doing in things like a token vault, and also our innovation lab, which really just enables us to keep an eye on where the industry is evolving.

Kenneth Worthington -- J.P. Morgan -- Analyst

Okay, great. Thank you very much.

Operator

Thank you. Our next question is coming from Brian Bedell from Deutsche Bank. Your line is now live.

Brian Bedell -- Deutsche Bank Securities -- Analyst

Great. Thanks, good morning folks. Maybe just to start off with the -- obviously the global fixed income franchise and the increase in outflows, maybe just if you can talk about what you're saying to the financial advisors, we've seen sales obviously come down there pretty sharply in the last three quarters, and even also weighing a little bit on the global equity side. So maybe the conversations with advisors, how that's going. Maybe that sort of the tempo into January, and with that Morningstar reclass, I guess, would you say there is a certain level of AUM that might be at risk, just based on that reclass in the performance or maybe just a little extra color around that.

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

Yeah, I think first and foremost, I mean the messaging is really that one, this -- it doesn't fit neatly into any category. So I think the people that are familiar and have sold the fund do it for defensive purposes. They do it, because it lowers the risks clearly against the big drivers of the interest rates and market beta and it really complements portfolios well. So that's the messaging that we continue to drive through the retail side and I think some of the heightened redemptions that you saw toward the end of the quarter or the end of the year, I think some of that is always tax driven in selling when you have a sector in a very strong bull market that had a tough period.

That will be something that you'll just see heightened levels of redemptions and we've seen that come off a bit. It's hard to kind of gauge what the reclassification can do. I can just say it from experience with this asset class is how quickly it moves around. And just with geopolitical events and movements within global macro, we can see quick rebounds and performance really within a week or two.

So, and I think the -- most of our advisors and shareholders are -- understand that and that's just the messaging that we want to continue to drive. But this is a defensive way, that's not co-related to many of the drivers in your market and continue to reinforce that message and how it's done in past down cycles, but it's clearly defensively positioned and that's the messaging that we continue to drive.

Jennifer M. Johnson -- President and Chief Operating Officer

And I think they did a very good piece on the Corona virus and just reminding whether or not this one is going to be a very serious epidemic or not that you always have tail risk in portfolios and it's good to have that diverse portfolio. And this is an insurance policy positioned very defensively. And that has been well received by clients.

Brian Bedell -- Deutsche Bank Securities -- Analyst

And so are you seeing improvement in the flow momentum in January versus what we saw late in the fourth quarter? In this area?

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

Yes, I would say still pressure but definitely better than what we saw in the prior quarter. The redemption side is a lot better.

Brian Bedell -- Deutsche Bank Securities -- Analyst

Great, thanks. And then maybe just back to the M&A strategy, maybe as you think about through diversifying into different areas, or expanding that Fiduciary high net worth strategy, is it and also in the commentary about the undervalued balance sheet and the $3.5 billion of excess cash, we -- if you [Phonetic] guys just maybe becoming more of a roll-up of other private wealth managers over the long term and if so, is that more of a sort of a bolt-on strategy or would you actually try to be more toward have a strategy of more like integrating those firms into Fiduciary and having it be a large integrated platform.

Matthew Nicholls -- Executive Vice President, Chief Financial Officer

Yeah, I think it's a combination of those two things and wealth. It's both integration of certain aspects of the business, Brian, but it's also a potential roll-ups, I think we should make clear, this is more of a -- we don't expect to expand it broadly across wealth management.

It's a specialized ultra high net worth franchise where we see significant opportunities in different states with different client bases that, as I mentioned a second ago, capitalize on the foundation that we have with Fiduciary Trust. So that's what this is all about. So we shouldn't confuse that important aspect of our strategy with what we're doing overall as a Company.

We do have many other aspects of the growth that we're focused on this, Jenny just pointed out, including across the traditional asset management business, distribution, various products, alternatives, institutional, for example, and some of those ideas are much larger ideas that are in our pipeline and as we move quarter-to-quarter where -- our list is getting shorter and shorter in terms of where we would actually take action, we hope in the next year.

Brian Bedell -- Deutsche Bank Securities -- Analyst

Okay. So we should expect more utilization of the balance sheet for M&A over the next say, a couple of years or so?

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

Yes.

Brian Bedell -- Deutsche Bank Securities -- Analyst

Okay, great. Thank you.

Operator

Thank you. Our next question today is coming from Craig Siegenthaler from Credit Suisse. Your line is now live.

Craig Siegenthaler -- Credit Suisse -- Analyst

Thanks. Good morning everyone.

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

Good morning.

Craig Siegenthaler -- Credit Suisse -- Analyst

Just looking at the decline in expenses and the guidance too, how are you able to invest in new technologies, distribution and also product, while also able to reduce total cost?

Jennifer M. Johnson -- President and Chief Operating Officer

Okay. So I'll take that. So I mean in one of the things that you over time we've always had a global footprint, and so there has been opportunity for us to ship positions to lower cost regions as well as historically as a global provider there were often not service providers who could really accommodate our global platform.

And so, we always had to keep these things in-house and it's hard when you keep it in-house until we scale it. And so, most recently we announced an outsourcing of some portion of our fund administration. And then I would say, just getting better at looking at massive amount of data like a market data research and finding opportunities there where historically that was probably managed more by the investment teams needs as opposed to centrally and finding out where you have overlap.

So it's just continuing to scour through and figuring out where those opportunities exist.

Matthew Nicholls -- Executive Vice President, Chief Financial Officer

I think the other thing on that is we've candidly just become in fairly short order, I would say much more disciplined about investing in projects that we see really moving the needle and moving away from a sort of hobby-type, luxury-type investments that we were making in our business for good reasons candidly, but given the shift in the environment we've just gotten much more disciplined about that.

And frankly we found other areas within the cost structure that provide more flexibility in the event that the market continues to be challenged. So I think our guidance has moved a little bit as we've noted in our prepared remarks to the positive in terms of the costs that we can reduce and we're very confident about the flexibility of our cost structure.

Craig Siegenthaler -- Credit Suisse -- Analyst

Thanks, Matthew. And just as my follow up, I have one on US distribution. What is your business strategy for targeting US RIAs [Phonetic] and I'm talking outside of Fiduciary Trust and Athena and Penn Trust, it's the fastest growing segment of US Wealth and within that, what sort of Franklin products are you finding the RIAs most interested in?

Jennifer M. Johnson -- President and Chief Operating Officer

The RIAs want more -- less kind of traditional and then to the extent its traditional ETFs are obviously very popular. So SMAs are popular there and as we talked about, we hired somebody to run our SMA business and that's starting to grow. Our ETFs had its best quarter ever with $1.2 billion as a matter of fact the launch of our FLCO, which is our core bond was I think the third-fastest growing ETF in 2019.

So those are interesting for that channel, but how do you really get mindshare of the RIA, and that's what we're talking about those additional services as the RIAs had to grow their business into more of a wealth management business finding ways that we can have tools and take some of the capabilities that Fiduciary Trust provides to its clients to provide its value-added services that aren't particularly more costly for us to add to it, but can be leveraged more broadly there.

Craig Siegenthaler -- Credit Suisse -- Analyst

Great. Thank you, Jenny.

Operator

Thank you. Our next question today is coming from Patrick Davitt from Autonomous Research. Your line is now live.

Patrick Davitt -- Autonomous Research LLP -- Analyst

Hey, good morning guys. First one on these kind of bolt-on deals of Fiduciary Trust, how should we think about those running through the financials from a revenue and operating income standpoint and then maybe more broadly through the lens of the comment about doubling it, how should we think about future AUM or each deal adding to results over the -- as they come through?

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

Yeah, I think -- Good morning, Patrick. I think the way to think about the two transactions that we've announced, bearing in mind that Athena closes in February and Pennsylvania Trust closes in April, is that they'll add collectively about $0.015 to $0.02 a share to earnings. The margin is roughly in line with our margin as a Company, but we see expansion opportunities there. And future transactions that we may be looking at are very similar to that in proportion to the size of these transactions.

So I think that's the level of detail we're willing to give at this point.

Patrick Davitt -- Autonomous Research LLP -- Analyst

Great, that's helpful, thanks. And then on the commentary, should we take that you are not calling out any specific redemptions to mean that there aren't any as you have in the past couple of quarters?

Jennifer M. Johnson -- President and Chief Operating Officer

There are some that we are aware of. I think there is a $1.1 billion, we just don't know when it comes in. We don't have -- we don't, we're not aware of any specific dates this quarter that any episodic redemption is coming in.

Matthew Nicholls -- Executive Vice President, Chief Financial Officer

Yeah, I think the way to say it is that we're early in the quarter, with a better net flow picture so far, and we have very little known large episodic outflows, so that's why you don't see it written into the commentary.

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

Okay. And I would just add, I mean it -- we just in the past, it's hard when you know one or two and you don't know the timing and sometimes it's better not to say anything when we release our asset levels on a regular basis. Of course, there's still going to be pressure from the VA business and just trying to get the timing sometimes is very difficult, but there is still going to be larger redemptions coming on that side, as we've talked about in the past.

Patrick Davitt -- Autonomous Research LLP -- Analyst

Thank you. Helpful.

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question is coming from Dan Fannon from Jefferies. Your line is now live.

Daniel Fannon -- Jefferies & Company -- Analyst

Hi, thanks. I guess just to follow up on that, I guess, could you give us the level of assets left in that VA business at this point?

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

I think it's like $35 billion, but again, we'll -- if that's way off, I'll get back to you, but I think that's about somewhere around that number. Not all of that obviously is at risk. It's just some of the -- that business, as we've said before has been under a transition from using funds to using different lower vol models and index like products and lower cost products, and we've been transitioning our business in part of our solutions and we've actually been able to retain some of those accounts by switching them into the new model.

So I think that, that -- we're hopeful that, that can be a growth business instead of one that's been in constant decline as the traditional funds have been under pressure.

Jennifer M. Johnson -- President and Chief Operating Officer

And I will confirm Greg's number.

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

Okay. Jenny looked it up, so, it's good support.

Daniel Fannon -- Jefferies & Company -- Analyst

All right, thank you. And then just as a follow-up in the commentary you talked about the Income Fund, and you mentioned yield being a bigger factor for kind of investment decisions in over necessarily potentially performance, but we've seen outflows increase in the last three quarters, redemption levels growing, performance there obviously has come in.

So can you talk about again just to that fund and that category and how we should think about it on a go-forward basis based on either platforms or kind of distribution partners and how they're thinking about that fund in the context of everything else?

Matthew Nicholls -- Executive Vice President, Chief Financial Officer

Yeah, I mean I will start and just say that first and foremost, I mean, the yield is 2.5 times its category yield. So it's a very different creature than where it's measured against. And again, most advisors appreciate that fact. So you're going to have more duration risk if rates go up like they did in that -- in the quarter and generally a little more credit risk than maybe the category. The other big factor, as we talked about it before is how this fund fits into the new landscape of fee-based versus the traditional brokerage model and it's less -- less of an opportunity for sales in the fee-based world that's building models and we're building models as well and adapting our product lineup and solutions to meet that, but the traditional 40 Act fund of the Income Fund is under that secular pressure.

So it's hard to gauge how much of it, I don't think a lot of it's really performance related, I think you still are going to be under pressure as people transition to fee based, and we do our best, and as that settles, it's still always going to be attractive in the brokerage world. But there is other markets like we're just introduced in Europe in our SICAV lineup and hopefully we could gain some of what we lose in those redemptions.

Jennifer M. Johnson -- President and Chief Operating Officer

And I'll just add. The category has got a decline of about 2% and we were up 4%, and the Income Fund specifically gross sales were up 28%. So the strategy to Greg's point, the category is much lower yielding and so it often gets dinged in its measurement there, but clients love the yield. And we think there is huge opportunity for the SMA business on that product.

So it's been around 70-plus years for a reason.

Daniel Fannon -- Jefferies & Company -- Analyst

Understood. Thank you.

Operator

Thank you. Our next question is coming from Mike Carrier from Bank of America. Your line is now live.

Michael Carrier -- Bank of America Merrill Lynch -- Analyst

Good morning and thanks for taking the questions. We've hit on M&A a little bit and I guess just one question on that, and one follow up, just when you look at the backdrop, obviously you guys have been more active on the wealth side, but you've mentioned some product areas, distribution areas that you're more interested in.

I was just curious, when you look at the competitive backdrop, whether it's pricing, how you're thinking about returns on investments whether it's in Wealth or Asset Management, just kind of an update on how you're thinking about just given that you're spending more time on that area and how you see that kind of playing out.

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

Yeah. So, no market cycle is perfect in terms of when you should execute inorganic transactions and this is obviously no exception, given the fact that we're at the height of the asset class prices across nearly every asset class that we're in. And that we're interested in growing. So that part is a tough one to answer.

Other than the fact that we think the areas that we're looking at in particular will make us as a firm, more efficient and better utilize expensive resources that we have, that are very important for the future of our firm in a stand-alone basis and we think we can make acquisition targets more efficient and more attractive for them, and even more so it's like a multiplier effect when you put the two things together. That's point one.

In terms of what we look at around metrics and hurdles and such, I would just say that we look at a number of quantitative and qualitative metrics, including how the transaction could increase the return of our current assets, which I just referred to, for example, distribution is a very important one. Appropriate risk rated -- sorry, risk adjusted discount rates precedents, comps, the basic principle of achieving a return in excess of our own cost of capital. The things that you're very familiar with, we're very focused on.

Frankly in a very, very simple level, you can see the size of our cash resources and turning that cash into a positive catalyst in terms of increasing our earnings and making our firm more efficient capitalizing what we see to be a pretty exciting future in many areas, notwithstanding the pressure on the industry is what we're very focused on.

So it's really a combination of all of those -- all those things, Mike.

Matthew Nicholls -- Executive Vice President, Chief Financial Officer

And I would just add that as we said before, I mean, looking at a Benefit Street type, when you say what do -- how do we look at the world and landscape, and that's a classic example of an emerging category that is passive proof and one that we think is going to grow very well and one that we think we can add value to distribution and I would say, all of those are being validated to date as we continue to bring new products out and are ready to benefit from some of those positionings in the next year or so. And I think again we look at the landscape it would be more on lower cost institutional managers that we can then build into our retail relationships versus the older higher cost 40 Act type managers.

We'd be more focused on that and then technology, anything we can accelerate and look at platforms for distribution that could be helpful and build globally, those are the other areas that we think could be very important to us. And then finally I'd say as we said before alternatives, real estate, again passive proof of the categories, private equity, things like that, that really build out our alternatives group and then have the specialization of distribution in those categories and have the kind of breadth that allows us to have the specialization would be where we're heading.

Michael Carrier -- Bank of America Merrill Lynch -- Analyst

Right, that's helpful and then, just a quick follow-up maybe on the organic newer areas like the SMAs, models, multi-assets, I guess on one hand, you guys have the distribution, and you have long track records in a lot of the products, the other hand, some of the performance challenges in the near-term, a bit of a hurdle. So just want to get an update on how much maybe be traction you're seeing on that front, and do you need some of the shorter-term performance to shift in order to see that pick up?

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

Yeah, I mean I'll let Jenny follow me, but I don't think the -- you know the challenges of -- we have because of our asset mix and styles of the Templeton with the value discipline and a mutual with the value discipline doesn't mean that your solutions business and your SMA business can't be successful and they are not required to put those in the portfolios, if they think that, that style is not appropriate in this cycle.

So I don't think it's held back at all. We've been very successful getting our models into the larger distribution platforms and are seeing some growth there today. So I don't think the performance issues of just style of value versus growth and again if you look at our growth funds and how well they are doing across the board that they certainly are solutions benefits from that today as does our retail flows.

Jennifer M. Johnson -- President and Chief Operating Officer

Yeah, as Greg mentioned, you know, certain newer categories for us or where we put more resources SMAs are up, as he mentioned the model portfolios, and I think we talked on the prior call about a couple of wins we've had there, assets are up 45% from the same period a year ago, hitting $1 billion and good traction. Once you get in the model, you still have to go sell it through all the individual financial advisors in the firm and provide that kind of support, but we've had good traction there and then having already mentioned ETFs, we were actually the fastest growing firm with as far as the US ETF issuer with assets above $1 billion last year.

So these are all where we think the vehicles in which investment management is getting delivered in this new kind of fee-based model and we've got good traction in those areas.

Michael Carrier -- Bank of America Merrill Lynch -- Analyst

Okay, thanks a lot.

Operator

Thank you. Our next question is coming from Brennan Hawken from UBS. Your line is now live.

Brennan Hawken -- UBS -- Analyst

Hi, good morning. Thanks for taking my questions.

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

Hi, Brennan.

Brennan Hawken -- UBS -- Analyst

Hello. One on the SMA, and your guys approach there considering the expansion of that offering into the broker-sold channel. Just curious about when you think about it, what portion of your products do you think makes sense in that wrapper and whether or not you need to make further investments as those -- as those assets ramp. Because obviously you've got the wholesalers into the sales effort which is clear.

But it's my understanding that you need sort of trading pipes and other automated connectivity into each of those platforms, does that require any further investment, or are you guys already there?

Jennifer M. Johnson -- President and Chief Operating Officer

So I would say that, that is what we've been working on, as I mentioned bringing in the new head of SMAs, I think we learned a bit more about what we needed to do and I think we're in a good place today.

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

And it's not something we've been in that business for over 20 years and so it hasn't been a big emphasis for us, but Templeton had a very focused group early on and we've been in the muni business for a long time as well than SMAs.

Brennan Hawken -- UBS -- Analyst

And the part of the question about which portion of the lineup might make sense for that wrapper, because some -- not all of will since you need to own the underlying securities.

Jennifer M. Johnson -- President and Chief Operating Officer

Well, so the way the industries have uptick the Income Fund, right, there are securities in there that the individual client can't own on the statement and so you just do a completion mutual fund, and so we have launched a few of those. So for example, the underlying equities and bonds that are appropriate to be on the client statement would be there and then anything that the client can own individually, the advisor would allocate that to the completion fund.

Brennan Hawken -- UBS -- Analyst

Got it. Okay, thanks. That helps. And a follow-up on the trends you guys have seen here in January, certainly encouraging that the flow trends have moderated but can you help us understand why that is necessarily indicative of the best way to think about the path forward because it is just one month and when we look at the last three quarters, the redemptions seem to have accelerated each quarter and that's coincided with the deterioration in performance.

So is there something specific about when the calendar flipped, that should translate into that trend proving sustainable or maybe a little more color on that would be great. Thank you.

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

Yeah, I mean I think it's hard. I think January is generally a better month, number one, December you generally have higher redemptions in that quarter for tax selling and year-end and slower sales because there's a lot going on in December and January generally is just a better month in terms of flows.

You know, it's hard to gauge how much of that is tax selling and where obviously for us if you, again, it's hard to say take the global bond out of the equation, because that's been a big driver of flows both ways. But if you look at the last quarter, we had three major categories and inflows, which would have been a very positive story, if we didn't have the acceleration of $6 billion of outflows within Global Bond.

So I think you're right in asking that question, where does it go. I think there was more pressure for the quarter, and as I said before, things moved quickly in terms of relative short-term performance and we already have seen some recapture and performance in the quarter to date with global bonds. So that can move quickly and we've seen it in past cycles, how quickly it went from outflows to moving back to inflows.

Brennan Hawken -- UBS -- Analyst

Fair enough. Thanks for the color.

Operator

Thank you. Our next question is coming from Alex Blostein from Goldman Sachs. Your line is now live.

Alexander Blostein -- Goldman Sachs & Co. -- Analyst

Hey, thanks. I just wanted to follow up on the -- the one of the things you guys mentioned earlier regarding acquisitions to build out Fiduciary Trust and I think you said you expect to double that asset base over the next year or two. So maybe could you just spend a couple of minutes on the EBITDA multiples you're seeing the space that you're comfortable paying the competitive dynamics in that corner of the market, because I think there's a lot of businesses you would like to add scale and presence in that corner of the wealth management industry and what are the key selling points at the end of the day? Is it a one-off discussions, or are there more competitor, kind of why do people decide to sell it to Franklin?

Jennifer M. Johnson -- President and Chief Operating Officer

Yeah. I'll take that part and then why don't you talk about the multiples in EBITDA. You know, you're absolutely right, when you talk of these financial advisors, they're usually at a point where, as Greg mentioned are feeling that they can't continue to invest in technology when the regulation and the requirements around really adding all these wealth capabilities it because -- they realize they are subscale and there are a lot of buyers. The two acquisitions that we did chose us and they chose us because Fiduciary Trust has been around since the 1930s, it was set up by five high net worth families. It is really marquee ultra high net worth business that understands multigenerational asset management and the issues that go much beyond just figuring out investment returns.

And so it will always be a competitive space, and it will be a space where they're looking at their clients who they know well and saying, who is going to be the best stored of these assets? And so that's what we think is our big selling point.

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

Yeah. And I think in terms of the multiple in the price in the competition for these assets, I think, Alex, what you may be referring to is the broader wealth management business, of course, we know that private equity and other wealth managers in the mass affluent wealth space are very, very active and some of the EBITDA multiples being discussed here in 15, 16 times plus area even in businesses that don't actually have the acquisitions closed yet, for example. So it is a very highly competitive space from a rollout perspective because the economics just make so much sense.

In this area that we're focused on with the multiples, a little bit lower. I'd say so, say in the low double-digits to ten times to low-double digits area and that becomes more efficient for us upon the connection collaboration and to a certain degree integration with Fiduciary Trust that becomes very economically compelling to us and as Jenny mentioned the reason for us versus others is there are really a very small handful of very focused, pure ultra high net worth wealth managers. The services that you need to provide are very expensive to invest in and to retain and to have the right team to provide it. And I would say they're very specialized across the whole sleuth of different advisory solutions, if you will for sophisticated ultra high net worth folks.

So that's why we think we're a good home, just as Jenny mentioned we've become a sort of coming together of both sides. Not as necessarily going out and scouring the ground. We're also finding that upon the announcement in these transactions and news getting out of our interest through Fiduciary Trust, that there are more than we actually thought in the marketplace and there are several very important dates in the US that contain other sorts of firms in the $3 billion to $6 billion, $7 billion AUM area that will also be a very good fit for Fiduciary Trust in our strategy.

Alexander Blostein -- Goldman Sachs & Co. -- Analyst

Got it. That's very helpful. Thanks. The -- my follow-up question was just a quick one around expenses. I apologize, you mentioned it earlier, but if you look at the guidance, I think you're guiding to a down 2.5% expense growth for fiscal 2020 versus '19. I just want to confirm that off [Phonetic] of the total expense base of about $2.4 billion last year and that's inclusive obviously of the deals that you announced. So there is going to be a little bit of revenue that's going to come through with that as well. So maybe just kind of confirm the expense number for this year and help us think about the revenue contribution for this year from the deals that you are planning to close. Thanks.

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

I'd confirm that on the expense side. And I would also confirm that, that guidance is inclusive of the transactions that we've just announced. We're not going to separate out the revenue yet until that becomes a larger line item, but our guidance generally speaking on the expenses consistent where we expect revenue to be also.

So we -- as we have done this quarter and the same with last quarter. Our objective is to do our very best to have positive operating leverage in the business and I would say that would be our guidance for 2020. So our guidance of 2% to 2.5% perhaps even a little bit more expense reduction based of 2019 that you referred to, Alex, I would say that on the revenue side, we'd hope to be better than that.

Alexander Blostein -- Goldman Sachs & Co. -- Analyst

Got it. Great, thanks so much.

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question is coming from Robert Lee from KBW. Your line is now live.

Robert Lee -- KBW -- Analyst

Great, thanks. Thanks for taking my questions this morning. This may be more of a philosophical question. But if I think of the growing the high -- the ultra high net worth business, that I think some of the investments you're making in various platforms, you know, is there a desire or need here to try to get closer to the end asset owner. I mean one of the challenges for the industry broadly has always been there is someone between you and the ultimate owner of the asset.

So do you think that that's an important part of kind of your strategy, you're trying to get closer to who actually owns the asset and pulls a trigger?

Jennifer M. Johnson -- President and Chief Operating Officer

Yeah, yeah. So I mean we are still big believers in end financial advisor providing advice. We are not believers that the robo advisor is going to, and the machine is going to, in the end intermediate that Financial Advisor. You know these things like robo advisors, we think is more akin to a TurboTax which was going to put all CPAs out of business and now the CPAs are the big users of TurboTax.

So the key for us is what kind of as the advisor adds more wealth management capabilities what platforms can we invest in to get closer to that end advisor to be able to influence and help them be better at their business and so as we think about our investments on the technology side, it can be things like financial planning or other kind of tools that the advisor is expanding beyond just investment capabilities.

Robert Lee -- KBW -- Analyst

Great. And maybe just a quick follow-up, I mean there's clearly a lot of discussion on M&A on the call, but maybe this is a question, just to confirm what you're not interested. And I assume you're continuing to not be interested in any kind of scale driven merger.

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

I don't think that's accurate. to be frank. We don't want you seem like we are looking at every single thing on the planet there, as I've said in -- or as we said on previous calls, we're out there, very few transactions that contain an element of scale in it, that would make sense for us, but there's certainly others that contain that. And that is on our shortlist.

Matthew Nicholls -- Executive Vice President, Chief Financial Officer

Yeah, I think the point is, it we would never be first on the list of combining something for the sake of cost cutting and scale. We may get that secondarily as a benefit out of it, but it's really about bringing in areas that complement the firm and areas that we believe are going to be strong areas of growth in the future, but that certainly doesn't eliminate the benefit of certainly distribution and scale and things you can get out of that. Yeah. I mean we could, for example, consolidate an operation in the US, but remembering that what that business may contain would be applicable to many countries overseas that we're in that perhaps that party is not in.

Robert Lee -- KBW -- Analyst

Fair enough. I appreciate it. Thank you.

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

Thanks, Rob.

Operator

Thank you. Our next question today is coming from Michael Cyprys from Morgan Stanley, your line is now live.

Michael Cyprys -- Morgan Stanley -- Analyst

Hey, good morning. Thanks for taking the question. Maybe just following on the Fiduciary Trust build out, hoping you could elaborate a little bit more on the strategy there and talk about what you're looking for in firms that you might acquire and maybe you could talk a little about your process there. How you sift through and identify and prioritize and what your ultimate vision here is.

Jennifer M. Johnson -- President and Chief Operating Officer

I'll let Matt handle the -- how do we sift through. Again there are financial advisors that are -- that are almost family offices or really wealth managers that have done very, very well up until now. And the regulatory environment and the demands on services have increased. And, you know they're looking at their business and they're thinking, I want to add more things, but it's just difficult to scale this.

And so, they're looking for home with a firm that understands the wealth business, and the ultra high net worth business is about investment returns, it's about trust and the state planning, it's about tax efficiency and it's about education in the next generation of wealth. And the wealthier and the older you get, the next generation education becomes the most important part of that.

And so if they're looking at their clients, they want to make sure that they're connecting with the firm that can provide longevity and also has that same core culture of understanding what it takes to really manage for a high net worth family, and not all the roll-ups that are happening out there -- they're meshing both the ultra high net worth with mass affluent and that becomes a danger of diluting kind of a capability that you provide for the ultra high net worth.

Matt, I don't know if you want to talk about it.

Matthew Nicholls -- Executive Vice President, Chief Financial Officer

Yeah, I mean, and look we have, as I mentioned a moment ago to Alex's question, we have financial discipline around these things. So obviously we want to make sure that it's going to work financially for us upfront in terms of the multiple, and then there's various earn out structures and performance targets that we have against the business.

I think that the -- where that base location is very important in terms of limiting disruption obviously is always very important, the point Jenny made around diluting, the last thing we want to do is dilute the specialized nature of what Fiduciary Trust does and frankly the targets that we -- or the partners of future companies that we could own that's exactly how they feel as well. They don't want -- what they do to be diluted in any way by what we do. So when we're having these discussions, it's really a coming to a mutual understanding very rapidly that what we're trying to achieve is the same goal ultimately.

So, the summary is, we're financially disciplined, obviously, it needs to make sense for us a very good use of our cash and it's a very good use of an asset sort of pretty frankly being a little bit under-appreciated in the overall scheme of things, Fiduciary Trust, so.

Michael Cyprys -- Morgan Stanley -- Analyst

Great. And just as a follow-up maybe on the ETF side, I was hoping you could elaborate on the ETF strategy I think about $7 billion in AUM is where you are today. But just curious as well around that what the interest or appetite there is to scale that may be in a more quickly more material way through inorganic means and what scenario could that makes sense or maybe you add some other geographic regions and more strategies around that.

Jennifer M. Johnson -- President and Chief Operating Officer

So we're -- we launched in US, Canada and Europe and looking at Asia, we are quite happy with our growth. We were one of the first multi-factor smart beta issuers and actually that's the biggest group of assets. The second is our active ETFs and the third is our passive which are the cheapest, actually passive in the category that they're in. And the challenge with ETFs is, you always have to get scale to be able to attract the institutions.

And so, we're starting to see more and more flows there every day and I think that it probably if the right opportunity came up, we'd certainly entertain it, but at this point the -- we're focused on just, we have a great team, and the growth there.

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

And I would just add, I mean, it -- as you know, I mean like anytime you get in a new business, it takes a few years, the big distributors wait and I think we're at that critical point where we've been out good performance in many of the ETFs and getting on all of pretty much all of the platforms now.

So I think that's the big change of where we are in the cycle. So we're optimistic that, that can that will really accelerate growth.

Jennifer M. Johnson -- President and Chief Operating Officer

And from a scale, for example, we are, I think it's launching this month, three thematic ETFs that are the Franklin genomic, the disruptive commerce, and intelligent machines and we're basically leveraging the team that runs our Dynetek fund to be able to provide those, because there was feedback from clients in that they wanted some specialized type products that -- thematic products, so you're able to scale existing teams that are historically have been doing traditional mutual funds.

Michael Cyprys -- Morgan Stanley -- Analyst

Great, thank you.

Operator

Thank you. Our next question is coming from Glenn Schorr from Evercore. Your line is now live.

Glenn Schorr -- Evercore -- Analyst

Hi, just one follow-up to your comments earlier on Benefit Street and one micro, one macro. At the micro level, I'm just curious if you could update us on anything related to performance, new products and distribution penetration that you've seen, now that they're part of the family, and then at the higher level, curious how you're thinking about addressing other private asset classes across PE, real estate, infrastructure and things like that. Thanks.

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

Yeah. Maybe I'll just start with the BSP and I think as we said before, it's not something you just plug and expect to see flows on the retail side, it's a complex, more complex product set up and we set up interval funds for the retail, for retail distribution in both the US and in Europe. And we've also this year are planning on having a BDC offering with one of the major distributors here in the summer and all of these are going to be meaningful in terms of flows this year.

So I think we're very pleased with performance, with the pace and how we've gotten our distribution kind of lined up behind it. And it's -- it is a more complex sale that we've learned, but we've done a lot of training and continue to be very optimistic there. I think the difficulty when you say the tactics around the other asset classes, it's very hard to go out and just buy, as you know buy real estate or buy private equity and so it's performance, fee driven, it's partnership driven and you've got to find the right combination of incentives to make that work. So it's not always easy to do that. And I'll let Matt if you want to add.

Matthew Nicholls -- Executive Vice President, Chief Financial Officer

Yeah, just got a couple of other points on Benefit Street, first of all, in terms of their revenue contribution for the quarter it was up 8% from last quarter to $53 million that was largely due to performance fees but still its increased contribution. I think the second thing is, the team of Benefit Street is providing tremendous leverage for us at Franklin in terms of our overall strategy for alternative asset managers. They're all very experienced spending time with the other asset classes with the new alternative arena, including frankly spending time considering smaller specialized acquisition targets in that area, both domestically in the US and internationally. So we get -- there's multiple other benefits to owning Benefit Street away from just the organic sort of activity that we have going on which we are enthusiastic about for the future.

Glenn Schorr -- Evercore -- Analyst

Alright. Thanks so much.

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

Thanks Glenn.

Operator

Thank you. Our final question today is coming from Brian Bedell from Deutsche Bank. Your line is now live.

Brian Bedell -- Deutsche Bank Securities -- Analyst

Great. Thanks for taking my follow-up. My question on the ETF inorganic trade was already answered, but maybe if I could just add a couple of things. Maybe your view on the active semi transparent ETFs, is that something that you think you would like to develop and leverage some of your better performing track records?

And then also I think you mentioned geographies, you'd like to expand in, in terms of an M&A strategy. Is that more distribution-oriented or is it more product-oriented?

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

On the latter one, I'll start and Jenny would go the ETF one. On the latter one, it's a combination of both, depends on what market if it's more of the emerging markets, it's really distribution driven. In certain other local markets as you know, we have a local asset management business in several markets sometimes can be beyond distribution.

And in certain cases it's just, we have a very good operational group, if you will, based in certain of these countries and we can be much more scaled with the same amount of head count. So we're very focused on certain key countries and growing those countries, that's what we mean by that.

Jennifer M. Johnson -- President and Chief Operating Officer

And the non-transparent ETF vehicles that have been approved, they're really US equity. So you are limited. And we certainly talk about it, and at the point where we feel that a particular product requires non-transparent, we will absolutely entertain it, as I mentioned in rolling out these three thematic funds, we felt comfortable that we didn't need non-transparent on those. And in the fixed income ones that we've rolled out. So far we haven't felt the need for it, but it is not something that we are adverse to if it makes sense for particular product.

Glenn Schorr -- Evercore -- Analyst

Great, thank you.

Operator

Thank you. That concludes our question-and-answer session. I will turn the floor back over for any further or closing comments.

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

Well, thank you everyone for attending our call and we look forward to speaking next quarter. Thank you.

Operator

[Operator Closing Remarks].

Duration: 56 minutes

Call participants:

Unidentified Speaker

Gregory E. Johnson -- Chairman of the Board and Chief Executive Officer

Jennifer M. Johnson -- President and Chief Operating Officer

Matthew Nicholls -- Executive Vice President, Chief Financial Officer

Kenneth Worthington -- J.P. Morgan -- Analyst

Brian Bedell -- Deutsche Bank Securities -- Analyst

Craig Siegenthaler -- Credit Suisse -- Analyst

Patrick Davitt -- Autonomous Research LLP -- Analyst

Daniel Fannon -- Jefferies & Company -- Analyst

Michael Carrier -- Bank of America Merrill Lynch -- Analyst

Brennan Hawken -- UBS -- Analyst

Alexander Blostein -- Goldman Sachs & Co. -- Analyst

Robert Lee -- KBW -- Analyst

Michael Cyprys -- Morgan Stanley -- Analyst

Glenn Schorr -- Evercore -- Analyst

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