Welcome to Franklin Resources Earnings Conference Call for the quarter ended June 30, 2021. Hello. My name is Hillary, and I will be your call operator today. As a reminder, this conference is being recorded. I would now like to turn your conference to your host, Selene Oh, Head of Investor Relations for Franklin Resources. You may begin.

Good morning, and thank you for joining us today to discuss our quarterly results. Statements made on 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 the MD&A sections of Franklin's most recent Form 10-K and 10-Q filings. Now I'd like to turn the call over to Jenny Johnson, our President and Chief Executive Officer.

Thank you, Selene. Hello, everyone, and thank you for joining us today to discuss Franklin Templeton's results for our third fiscal quarter. Greg Johnson, our Executive Chairman; Matt Nicholls, our CFO; and Adam Spector, our Head of Global Distribution, are also on the call with me today. We hope that everybody is doing well. This past Saturday marked 1 year since we closed on our landmark acquisition of Legg Mason and its specialist investment managers. As we stated at the time, this is a growth story for our firm, and our focus continues to be on delivering strong investment results for our valued clients. This commitment has been our North Star throughout the past year. Over the past 12 months, through the hard work and dedication of our employees, we've made significant strides bringing together the two firms and executing on our growth strategy. We have created a diversified business across asset class, vehicle, client type, and region, and we're well positioned in key growth areas where there is client demand, including alternatives, fixed income, SMAs, and ESG investing. Early on, we redesigned a nimbler and more adaptable distribution model with a more region-centric sales approach, pushing our decision-making and resources closer to our clients, and the positive momentum we're seeing around sales flows shows that what we're doing is working. Our sales initiatives are resulting in deeper relationships and increased diversification in flows across funds, vehicles, and asset classes. These factors have led to significant improvement in total net flows since the time of the acquisition. Our combined sales team has been actively cross-selling. In the U.S. alone, almost 6,000 financial advisers have deepened their relationships with Franklin Templeton through enhanced access to newly introduced capabilities. Specifically, this progress has led to growth in key areas of the business. Since the acquisition, we've grown alternatives by 15%, wealth management by 22%, and SMAs by 25%. Above all else, we've been incredibly aligned in terms of culture and our focus on delivering strong investment results. Our efforts this past year have translated into a better, stronger Franklin Templeton. Turning now to our third fiscal quarter where our momentum has been building. Ending assets under management reached a record high of $1.55 trillion this quarter, and investment performance continues to strengthen across a broad array of investment strategies. Overall, results continue to reflect outperformance in fixed income, including Western Asset and Brandywine Global alternative asset strategies and global and international equity strategies across Franklin Templeton equities. Mutual funds with 4 or 5 star ratings by Morningstar increased to over 150 funds this quarter. Turning next to distribution highlights. We saw positive net flows into the majority of our specialist investment managers and Benefit Street Partners, Clarion, ClearBridge, Fiduciary Trust International, and Martin Currie all reached record highs in assets under management. We were pleased to see a record $3.1 billion in net inflows to alternatives, and also that our fixed income net inflows returned to positive territory at $2.1 billion. We made progress diversifying our net flows across funds, vehicles, and asset classes during the quarter, scaling smaller products and creating broader sources of revenue. For example, 15 of our top 20 funds with positive flows are products outside of our largest 20 funds, and each have an average AUM of less than $2 billion. In the U.S., our collective sales initiatives are yielding positive results with net flows during the quarter. Specifically, we saw net flows into U.S. retail, which is our largest distribution opportunity, and in global financial institutions, our largest client opportunity. On the product development front, we launched the $1 billion pre-leverage Western Asset Diversified Income Fund. This was our largest ever fixed income closed-end fund IPO and illustrates the successful partnering of our SIMs investment capabilities with the combined reach of our distribution platform. Additional recent strategic developments include: the close of the acquisition of Diamond Hill's high yield-focused U.S. corporate credit mutual funds in July, adding $3.4 billion to assets under management; and the announcement of a merger of Benefit Street Partners Realty Trust with Capstead Mortgage Corporation, which will create the fourth-largest publicly traded commercial mortgage REIT upon closing. Looking at our financial results. Our adjusted operating income increased by 3% to $601.2 million from the prior quarter, inclusive of the one-time impact of costs associated with the successful launch of the Western Asset closed-end fund that I just mentioned. And with $6.4 billion in cash and investments, the ongoing strength of our balance sheet enables us to invest with confidence in the business and make sure we're best positioned to be a leader in an ever-evolving industry. Finally, I want to thank all of our employees for their efforts this past year working under extraordinary circumstances. I'm extremely proud of what we've been able to accomplish on behalf of our clients. Now to your questions, operator?

Our first question is from Patrick Davitt with Autonomous Research.

My first question is about the $5 billion 529 redemption. Do you know if that will affect the mutual funds, or is it more related to an institutional wrap? The mutual fund flow data we have indicates a significant outflow in July, and I'm curious if that's what it relates to.

Yes. Thanks for that question. That is in the mutual fund flows. Those were mutual funds that were in that program.

Great. And then on the drivers of the expense guide, you mentioned it being driven by the closed-end fund launch costs and the performance fee comp, but that would suggest an 80% comp ratio on the performance fee, which seems quite high. So is there something else driving the increase? Or was it right to think about the performance fee comp ratio being that high?

No. I believe we also saw a slight increase in other compensation due to strong performance in various areas of the firm, but the majority was related to performance fee compensation. We might need to discuss the 80% figure separately. I think it's significantly lower than that.

Our next question comes from the line of Dan Fannon with Jefferies.

I guess just to follow up a bit on just performance fees, and I know these are difficult to predict, but this was the largest quarter from you, I think, in history. And so I think the prepared remarks said something about a diverse set of the contribution. So can you talk about kind of where the performance fees came from? And then looking ahead, how we should generally think about this quarter vis-a-vis what might be in the future, just given the limited disclosures around the funds?

Yes. A few points to mention. First, approximately 70% of the performance fees come from our largest alternative asset management and specialized investment managers, specifically Clarion and Benefit Street Partners. The remainder is generated by a diverse group that constitutes about half of our specialized investment managers, who have all been performing well. In terms of context for this quarter compared to future quarters, it’s important to highlight that this quarter included two significant episodic performance fees that coincided. In one case, several funds met their performance hurdles and became eligible for carried interest distributions, which had built up over approximately four years. In the other instance, a substantial portion of invested capital qualified for a long-dated performance fee due to strong performance during the management period, leading to a sizable performance fee. This combination of factors, along with the performance fees from over half of our specialized investment managers, caused an increase in the performance fees. Therefore, I would reiterate our guidance of $10 million per quarter for performance fees. While this may seem conservative, we believe it is prudent to be cautious with our estimates.

Okay. That's helpful. And then just generally on alternatives, given the strength in flows in the quarter. Can you talk about just kind of the fundraising environment today, kind of the runway you see for growth here and where the potential biggest contributors for that asset class at the manager level could come from?

Yes. There are a few things that are really working for us and alternatives. One is just the quality of firms that we have. We think they're strong in their individual asset classes, and we're in a number of different alternative areas from real estate to private debt, private equity to hedge funds. We also have an advantage of being able to raise money for alternatives in a geographically diverse base. We're seeing growth around the world in our alternatives. It's not just U.S. flows. A number of our alternatives have an ESG component to them, especially in real estate. And so that combination of ESG and alternatives is resonating, I think, quite strongly. And finally, from the alternative side, I'd say we spent a lot of time concentrating on how to democratize access to alternatives to make sure it's not just institutions in the ultra-high net worth segment that can access alternatives. And we're raising money in retail as well. All of that, to me, speaks to the ability to have continued strong momentum in fundraising there.

Let me just add, Adam, there is a lot of discussion about the democratization of alternatives based on our experience. I believe we have one of the strongest retail franchises. Selling in a retail franchise is complicated, and we are seriously focused on figuring out how to do it. We have had some success in this area. Additionally, if you consider our major alternative managers, Clarion and BSP, both are income-generating, which fits very well in the retail space. The key is educating the advisers about it and increasing brand awareness. Given the relationships we have, we see this as a significant opportunity for us.

It's also good to put alternatives generally into perspective in terms of where we've come and where we are. About two and a half years ago, we had about $18 billion in alternative assets under management, and we now have $141 billion under management. Obviously, that contains two large acquisitions, Benefit Street Partners and Clarion, but it also includes an embedded 15% organic growth rate over that period. So it's both acquisitions and making opportunities work in terms of organic growth.

And the final thing I would add is that we're continuing to add resources to distribution there. And it was only last quarter that we started a specialized sales group to focus just on alternatives in the U.S., and we're seeing traction from that already.

Our next question comes from Ken Worthington with JPMorgan.

This is Samantha Trent on for Ken Worthington. So our first question is just on the equity fund on these equity fund redemptions that were called out this quarter. You highlighted that these assets generate very little in revenue. Could you just kind of give us an indication on how much an equity asset spring from manages that generate little, if any, revenue? And is this a good business? And what do you see as the outlook for these low-fee assets?

I’m not sure if I can think this through clearly. You know that smart beta and passive strategies typically have lower fees, and most of those are in our ETFs. In our $13 billion in ETFs, 50% are actively managed, which means those fees are not low. However, trends are moving toward lower fees. I’m pausing because I’m trying to consider if there are any obvious significant factors, but nothing comes to mind immediately. These relationships are somewhat unique, and we established them years ago with local or smaller managers who typically have lower fees.

Okay. Additionally, you mentioned that Franklin entered into several new agreements with distribution partners. Can you discuss the nature of these agreements and whether you are aiming to collaborate more with third-party distribution partners? Also, please explain how the costs associated with these new agreements compare to your existing distribution agreements.

Sure. I don't think there's a real change in the cost of distribution. What I would highlight is that the added agreements are really a direct result of a concerted effort to cross-sell. So a lot of those additional agreements are onboarding legacy Legg Mason products to Franklin agreements or vice versa. And we've done both. One of the statistics we've called out is that we've cross-sold to about 6,000 new advisers in the U.S. that is advisers who used to do business with only legacy Franklin or legacy Legg Mason. We're able to do that because we're taking on more agreements and putting more products on broad platforms. We also see a real geographic benefit to taking those new platforms on. If you think about Europe, as an example, in EMEA, where Franklin historically had a stronger distribution footprint, about 15% of our AUM is legacy Legg Mason in terms of retail distribution, but it's about 30% of the flow. So getting products onto those platforms has had a real immediate benefit to us.

Our next question comes from Brennan Hawken with UBS.

You referenced the enhancements to customization capabilities within your SMA offering. Can you speak to where you are today with that customization and those capabilities and whether or not that presents a possible revenue opportunity within that channel? And what investments do you want to make to enhance that offering and further execute that opportunity?

Let me begin, and then Adam can elaborate. Currently, about 10% of our SMA business is already quite customized, including services like tax harvesting or specific client preferences. We truly believe that as technology, fintech, and share fractionalization evolve, the need for customized individual accounts will increase significantly, whether for tax strategies or ESG preferences. Clients are seeking this level of customization to better fit their portfolios. Fiduciary Trust has been a high-net-worth manager for nearly 90 years. Typically, high-net-worth clients come with concentrated holdings from a single company they've invested in, and we tailor the rest of their portfolio around that. Since these clients are often in higher tax brackets, tax management is crucial for them. We've observed a shift towards fee-based services, with rising expectations for financial advisers to offer the types of services that were once the domain of high-net-worth managers like Fiduciary Trust, making them more accessible to a broader audience. We believe this trend is lasting. Our SMA has had customization capabilities for some time and we're committed to enhancing those further. Adam, you are more attuned to the daily operations, so feel free to add anything to that.

Yes. I think Jenny really did hit the high points there. It is already 10% of our $125 billion in SMAs. It's continuing to grow, and we're continuing to expand that reach to more folks. What I would say in general about our SMA business is that ClearBridge and Legg Mason historically had an incredibly strong infrastructure in terms of an operational and technological platform for the SMA business. We’ve now been able to use that platform across the business such that about 50% roughly of our net flow into the SMA business is coming from the legacy Franklin investment teams. So really seeing, again, the advantage of using a legacy part of one firm to benefit the entire organization.

Yes. I've definitely heard about that success. But is there anything you can add to the revenue opportunity tied to that 10%?

I would say, in general, that when we look at our SMA business, it tends to be a very good revenue business because it tends to be stickier than mutual fund business. We have a longer average life, and that has a definite revenue impact. I would also say that to the extent that you customize for a client, over time, that relationship becomes less about quarter-to-quarter performance and more about really meeting the client's overall goals, whether those are ESG goals or tax efficiency goals, which again leads to longer-lived assets, which I think has a positive revenue impact.

From a profitability standpoint, even though the fees are lower, it is a higher margin business and costs less to operate.

Because it relies on the existing infrastructure, the incremental benefits are evident.

Yes, correct.

Yes. Okay. And then, Matthew, I understand your comments regarding the variable nature of the performance fees and that $10 million per quarter seems conservative, especially after the last quarter. But should we consider seasonality in the performance fees as we adjust to the new business mix at Franklin? Additionally, you nearly addressed the compensation ratio earlier. Should I think of it as roughly half of that 80% as a consistent estimate?

Yes, I believe that's a fair assessment. When considering the increase in expenses this quarter compared to last quarter, if we exclude the performance-related compensation and the costs associated with the closed-end fund launch, expenses would have been slightly lower quarter-over-quarter. This is an important point to consider for calculating the performance-related compensation, which is roughly between 50% and 60%. However, the specifics can vary based on the performance fee and the particular investment manager or mandate involved, making it somewhat challenging to generalize. For this quarter, that perspective holds true. Regarding the overall compensation ratio, our comp ratio was 44% for this quarter, consistent with the previous quarter, and I anticipate it will range between 43% and 44% next quarter, aligning with a 5% decrease in compensation and benefits. In terms of information systems and technology, we project a slight increase of about 5% to 7% in the fourth quarter, largely due to outsourcing initiatives that will help offset reductions next year, and even a bit into the fourth quarter. Concerning occupancy expenses, we expect these to remain stable in the fourth quarter, possibly rising by 1%, as we explore some interesting opportunities that may lead to slightly higher expenses, followed by significant reductions in 2022. This quarter, general and administrative expenses were notably higher due to the costs from the closed-end fund launch; without those costs, G&A would have been stable. For our expense guidance in the fourth quarter, we are assuming at least 50% of normal, or normalized, travel and entertainment, which would result in approximately $125 million of G&A for the fourth quarter.

Our next question comes from Brian Bedell with Deutsche Bank.

Great. One quick clarification on that question. Is that sequential growth or year-over-year?

Sorry. Brian, which sequential on what?

On the expense guidance you provided, is that sequential growth?

Quarter-over-quarter. So fourth quarter versus third quarter, yes.

Okay. I asked because I wanted to clarify that. My broader question is on ESG, the $200 billion of AUM that you referenced, that's up from $175 billion in the prior quarter. So if you can talk about what proportion of that was due to net flows into ESG products as compared with any kind of reclassification or funds that have now been recategorized as ESG. And then importantly, of that $200 billion, what would you say is an exclusionary strategy as opposed to direct investments in sustainable investments?

So let me try to tackle that. I don't have the exact details. I would say, in general, when you think about that $200 billion, it's not primarily exclusionary based at all. Instead, I would say if you had to try to categorize it, think about it as more assets that are in line with the European Article 8 or Article 9 definitions. That's roughly how we think about what that $200 billion is. Most of the change there really is due to either market performance or flows because we're seeing very strong flows, especially in Europe. If I take a look at our European assets, I think ESG is going to be key in every single market. Europe is just a little bit ahead right now. I believe that Article 8 and 9 type assets, that $200 billion number, that represents something like 15% of our AUM in the EMEA region, but 30% of our flow and 50% of our pipeline. So it is becoming more and more important. So I think you'll see that number rise over time.

We believe that Europe’s approach with Article 6, 8, and 9 is a strong model. We're happy to have numerous products meeting the criteria for Article 8 and eight strategies for Article 9. What’s particularly rewarding is the diversity across all our SIMs. We categorize them into four types: thematics, tilted, values—which can include options like Shariah and sukuk funds—and impact. We are seeing participation from Clarion, Martin Currie, Franklin, and Western. Overall, across our various SIMs, we have funds that align with these Article 8 and 9 categories, which is beneficial for our positioning.

Okay. That's helpful. Can you provide some insight into the breakdown between institutional and retail clients? Would you say that the products being classified under Article 8 and 9 are primarily retail products? Additionally, you mentioned customized SMAs earlier in response to another question regarding clients' ability to incorporate ESG considerations into the SMAs. Could you elaborate on how important that aspect is?

Yes. I would say in that 200, the customized SMA is not a huge part of that number because a lot of that customization is really tax loss harvesting. So I don't think that's a huge part of that number. Institutionally, we are seeing significant demand for ESG. And I think in certain markets in Europe, in Australia, it's hard to win any new institutional mandates unless you have ESG integration. So I see that as a theme across both retail and institutional.

Got it. Lastly, regarding the flow figure you mentioned, it was performance inflows that contributed to the $175 billion to $200 billion. Would it be accurate to say that you experienced more than $10 billion to $12 billion in inflows into what you classify as ESG products, if we exclude the market for the second quarter?

I think we're going to have to get back to you on that. I don't have that number in front of me.

Our next question comes from Bill Katz with Citigroup.

Maybe first question, coming back to expenses for a moment. What is your market assumption as you think through the fourth quarter? And then maybe the broader question is, Matt, you mentioned that there's some synergies coming. I don't know if that's just sort of remaining synergies within the deal, if there's anything new. Any way to sort of at least initially ring-fence how you're thinking about fiscal '22, maybe excluding performance fee contribution on the comp side or the closed-end fund vehicle just for comparative perspective?

What was the first question, Bill? The first question.

So I was just asking about on expenses, just the guidance for the fourth quarter, is that assuming flat markets like it's been historically? Or is it...

Yes, it assumes a flat market for the fourth quarter and performance fees at the rate I mentioned, rather than anything that might be elevated. Regarding 2022, it's a bit early to focus on the fourth quarter and provide views for 2022 when discussing the fourth quarter. However, I want to remind you that we have achieved a notional amount of about $150 million in expense reductions related to the merger transaction, and we expect to reach that amount by year-end. This means that in 2022, we plan to achieve another $150 million in expense reductions, assuming all else remains equal.

Okay. And then just a follow-up, just to unpack a couple of different things. When I look at the data, you had, I caught that U.S. turned positive this quarter, which would imply that the international book was still outflowing. Maybe you could walk through maybe what's the difference between what's happening non-U.S. versus U.S.? And then just sort of following up on ESG, could you unpack maybe the equity component? I appreciate that you called out a couple of idiosyncratic outflows, but any sort of color on sort of what's coming in the door versus what is exiting?

Sure. From a regional perspective, the U.S. is our largest market, accounting for approximately 70% to 75% of total assets under management. We are seeing positive net flows both for the quarter and year-to-date, which indicates that things are going well. We continue to perform strongly with our major partners and are successfully cross-selling. Additionally, we have effectively integrated more specialists from across our investment teams, including alternatives and ETFs, into our client relationships in the U.S. This has been a significant strength. Our businesses in the Americas and Europe remain relatively flat, while the outflows have mainly occurred in Asia. The situation in India has contributed to a substantial portion of these outflows, along with some other one-time equity outflows in Asia that have negatively affected that region. We've also faced challenges in Japan, but the positive news is that we are now seeing a turnaround in Asia. Our pipeline in Japan is growing more diversified, and we are acquiring new clients there. Our retail business in Australia is exceptionally strong, achieving net positive flows for about 15 consecutive months. Overall, we are beginning to see improvements in Asia, which has been our slowest region. Regarding the future, I view distribution as having a consistent operational aspect that is effectively generating sales and managing assets. This aspect is performing well across the board. The central distribution teams are collaborating effectively with our SIMs distribution teams, and we are executing our plans. However, we have encountered challenges with larger deals recently, which has affected the negative numbers. Nevertheless, we have a robust pipeline with many deals in progress, and I believe that these larger opportunities will start to materialize soon.

Our next question comes from Glenn Schorr with Evercore.

I want to conclude on that point. I appreciate the increased diversification of your flows and the example you provided about 15 of the top 20 net flow funds outside your largest 20. However, I'm also interested in the largest 20 since they are substantial. I observed that gross sales are still down compared to the previous quarter, which you attributed to seasonality. How should we anticipate both gross sales and net flows moving forward, considering that the biggest funds aren't contributing? I recognize the great efforts you mentioned regarding diversification, but the large fund remains a concern.

So two things. One, there really is a seasonal effect. We've gone back for as far as we have data for the combined companies, and this quarter was always the slowest for gross sales. So there is a seasonal effect that's historic. In terms of the largest funds, right, if you think about things like Western core or DynaTech or the income fund, those are still among our top-selling funds and are in positive flow. So a number of the largest funds still are growing. So we do think that we have the right balance between the absolute largest funds growing, but it's not only the largest funds that are growing. We've got a number of funds that are under, say, $2 billion, where we see a lot of momentum. And I think that speaks really lend to the longer-term stability of the business. And one of the things we're trying to focus on is to really build a stable base for years to come. And I think when you're too focused in one geography and one vehicle type and one investment team, that creates a little instability in the business. So we're glad that a few of those huge funds are still growing and are net flow positive, but we want to add diversification to the mix as well.

Our next question comes from the line of Alex Blostein with Goldman Sachs.

I wanted to start with your outlook for the closed-end fund market. We obviously saw you in the market last quarter with the product. Some of your peers have been fairly active there as well. Is the market environment conducive to do more of those kinds of things? And then if so, maybe talk a little bit about the strategies where that would make most sense.

Yes. I think what we've seen is now that there's an ability to kind of structure closed-end funds in a way that's a little different than they were done years ago. There's really significantly more receptivity to the vehicle. I think it works well for investors, for the investment manager as well as for the distributors. So I think we're going to see more of them. Certainly, when you have $1 billion plus raise, you want to do more. We're currently in discussion with a number of distributors for a range of different products. And I think you'll see us come to market again.

Great. And then a lot of discussion on the call, obviously, around the diversification of the business and kind of really building out and scaling some things that you guys have built or acquired over the last couple of years. As I think about the capital return profile on a forward basis from an M&A perspective, maybe give us your kind of updated thoughts there as well. How big overall organic opportunity be as part of Franklin?

I think you can proceed, Jenny.

Let me start, and then Matt can follow. We have maintained a strong balance sheet because we want to be opportunistic. We believe we have the widest product lineup in the industry. If we were to pursue a large-scale acquisition, it would primarily involve adding assets rather than enhancing capabilities. Typically, strategic buyers may pay more than we would just to acquire assets, making such acquisitions unlikely, but we remain open to the right opportunity. We have clearly outlined our focus on expanding certain areas, particularly our alternatives business, which is a major priority. Although our alternatives business is already significant at $141 billion, representing less than 10% of our assets under management, we see additional growth potential there. We value the high-net-worth business, and Fiduciary Trust is a key player in that space, celebrating its 90 years in a very fragmented market. We aim to pursue more acquisitions there, especially as smaller registered investment advisors seek to merge with larger firms offering comprehensive fiduciary services such as trust and tax planning. We are on track to grow to $50 billion in high-net-worth assets and have already reached $33 billion. We also seek to gain more scale in areas like ETFs, as we are proud of our ETF business and team. If opportunities arise in specific regions, we would consider them. While we currently maintain a 50% active strategy with strong products, we have also indicated in the past that our investments in fintech will be more targeted, focusing on enhancing our distribution capabilities. An example is our investment in Embark, which was aimed at improving distribution penetration and has proven to be a successful investment. You can expect us to continue prioritizing such initiatives.

Yes. And you covered it perfectly. I think just a little bit more on the alt side, I mean, I think, Alex, the way we sort of think about the alternatives business is that's probably about 15% of our adjusted revenue at the moment. And we would like that to be significantly more than that. As you know, it's a large and growing area of asset management, and we have a really small market share overall. We think it's great what we have, and we're very pleased with the growth rate both organically and the ability to bolt things on, such as the REIT transaction. We've just had Benefit Street Partners. But there are some very attractive alternative asset strategies that we don't yet own because we don't have the capability that we think is very logical for connection with a large distribution business like ours.

And we don't discuss it frequently, but I believe we've demonstrated that we have a very strong venture group. Although the individual private funds are small, they originated from our growth franchise at Franklin, taking advantage of the capacity to include some illiquid assets in mutual funds. They currently manage about $2 billion in venture investments, with a significant portion within our traditional mutual funds. They are beginning to be chosen as a lead in competitive offerings against other venture capitalists. We're genuinely excited because we see a lot of opportunity there.

This concludes today's Q&A session. I would now like to hand the call back over to Jenny Johnson, Franklin's President and CEO, for final comments.

Yes. I just want to thank everybody for their time today. And we appreciate you guys taking the time to the call, and I want to wish everybody through this next phase of the Delta variant and everything to stay healthy throughout these times. So thanks, everybody.

Thank you. This concludes today's conference call. You may now disconnect.