Welcome to Franklin Resources earnings conference call for the quarter ended December 31st, 2023. Hello, my name is Joanna, and I will be your call operator today. As a reminder, this conference is being recorded, and at this time all participants are in a listen-only mode. I would now like to turn the conference over to your host, Selene Oh, Chief Communications Officer and Head of Investor Relations for Franklin Resources. You may begin. Good morning, and thank you for joining us today to discuss your quarterly results. Statements made on this conference call regarding Franklin Resources, Inc., which are not historical facts or 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 the first fiscal quarter of 2024. I'm joined by Matt Nicholls, our CFO and COO, and Adam Spector, our Head of Global Distribution. We're happy to answer any questions you have in just a few minutes, but first I'd like to call out some notable highlights from the quarter. Our first fiscal quarter results reflect ongoing momentum in a number of significant areas across asset classes, investment vehicles, and geographies. Our efforts are always focused on meeting the varied investment needs of our diverse global client base across market cycles while staying at the forefront of the asset management industry. Driven by increased expectations of interest rate cuts by the Fed and other central banks amidst disinflation, the 2023 market rally was particularly concentrated in the last quarter of the calendar year. Regardless of the market environment, investors remained cautious. According to Morningstar, global money market assets stood at $7.7 trillion as of December 31st, 2023, the highest level since Morningstar started collecting the data in 2007. Broadly speaking, our specialist investment managers see recession risks moderating and expect the global economy to slow over the course of 2024. But even as the economy slows, there are many opportunities for investors to put that cash to work into risk assets. Specific to the equity markets, last year we saw a small group of stocks dominate market returns, with the top five stocks representing 23% of the S&P 500's total market cap. Compare that to the height of the dot-com bubble in March 2000, when that number was 18%. While our investment professionals regard companies like the Magnificent Seven as market leaders, the level of relative outperformance for these stocks is likely unsustainable. We believe that this backdrop has created an opportunity for active managers like Franklin Templeton that offer a full range of investment capabilities across public and private markets spanning geographic boundaries in vehicles of our clients' choice. With greater clarity on interest rates in 2024 and as investors look to deploy cash on the sidelines, we believe Franklin Templeton is well positioned. In short, 2024 is likely to be a year in which balance and diversification are once again rewarded. During the most recent quarter, our clients gravitated towards alternatives, multi-asset, equity, ETFs, and SMAs, which all saw positive long-term net flows. Continued client interest in private market strategies led to net inflows for our three largest alternative managers. Additionally, we continued to see aggregate positive net flows in non-U.S. regions. We were pleased to announce that our acquisition of Putnam Investments closed on January 1st. With $148 billion in assets under management, Putnam adds complementary investment capabilities and a track record of strong investment performance. In fact, 87% or higher of Putnam's mutual fund AUM outperformed peers over the 1-, 3-, 5-, and 10-year periods. The transaction also enhances our presence in the attractive retirement and insurance markets. The addition of Putnam brings Franklin Templeton's AUM to approximately $1.6 trillion. In addition, Great-West Lifeco, a member of the Power Corporation Group of Companies, has become a long-term shareholder in Franklin Resources, consistent with its ongoing commitment to asset management. We are delighted to have the talented team at Putnam join us and pleased to have Great-West as a key stakeholder. Turning now to specific results for the quarter, starting with assets under management. Ending AUM increased by 6% to $1.46 trillion from the prior quarter and increased by 5% from the prior year quarter, primarily due to market appreciation. Average AUM declined by 2% from the prior quarter to $1.39 trillion and increased by 3% from the prior year quarter. Our specialist investment managers continue to produce competitive investment returns across a broad array of strategies. Investment performance this quarter resulted in 61%, 46%, 60%, and 61% of our strategy composite AUM outperforming the respective benchmarks on a 1-, 3-, 5-, and 10-year period. Notably, investment performance for the 5-year period jumped from 47% in the prior quarter to 60% in the recent quarter, primarily due to certain taxable fixed income strategies. With interest rates at current levels, fixed income opportunities are considered more attractive now and going forward may provide a better total return option over high-yielding cash equivalents. On the mutual fund side, the majority of AUM beat their peer groups and improved percentile rankings quarter-over-quarter in the 1-, 3-, and 10-year periods. One of our largest funds managed for yield was the primary driver of the decline in 5-year performance. Turning to flows, long-term net outflows, inclusive of reinvested distributions, were $5 billion compared to net outflows of $7 billion in the prior quarter and net outflows of nearly $11 billion in the prior year quarter. Reinvested distributions were $11 billion compared to almost $3 billion in the prior quarter and $12 billion in the prior year quarter. Alternative net inflows were $2.7 billion, driven by growth into private market strategies, which were partially offset by outflows in liquid alternative strategies. Our three largest alternative managers, Benefit Street Partners, Clarion Partners, and Lexington Partners, each had net inflows in the current quarter with a combined total of $3.8 billion. Client interest was strong across a number of alternative strategies on wealth management platforms under the Alternatives by Franklin Templeton brand in the US. Earlier this month, Lexington Partners announced the closing of its latest flagship global secondary fund with $22.7 billion of total capital commitments. Fund 10 ranks among the largest funds raised to date and significantly exceeded Lexington's prior secondary fund, which closed with $14 billion in 2020. Fund 10 attracted a diverse group of over 400 investors, including public and corporate pensions, sovereign wealth funds, insurance companies, and wealth channel distribution partners globally. We are delighted that approximately 20% of the capital raised in the fund came from the wealth management channel, which demonstrates the power of our coordinated global distribution network. We successfully brought together the alternatives' expertise of Lexington and our Alternatives by Franklin Templeton specialist sales team and leveraged our generalist sales team, who have deep relationships across the advisor market. Also this month, Benefit Street Partners closed its fifth flagship private credit fund with $4.7 billion of total capital commitments. Reflecting the strong demand for the asset class, BSP exceeded its fundraising target. We believe the current market opportunity and backdrop for U.S. direct lending is attractive, and BSP has significant underwriting experience, loan structuring expertise, and focus on deep due diligence, which provides us with a significant competitive advantage. BSP also announced the completion of the merger between Franklin BSP Lending Corporation and Franklin BSP Capital Corporation, business development companies. BSP believes this transaction will be immediately accretive to its shareholders and unlock nearly $700 million of capital that can be deployed into a very attractive origination environment. For further context, alternative assets now represent 18% of our AUM and comprise approximately 25% of our total adjusted investment management fees for the last 12 months. In terms of other areas of activity during the quarter, multi-asset net inflows were $500 million driven by Canvas, our custom indexing solution platform, and Franklin Templeton Investment Solutions. Canvas has achieved net inflows each quarter since the platform launched in September 2019, and AUM has more than doubled to approximately $6 billion since the close of the acquisition. This quarter, Canvas generated net inflows of approximately $400 million and continues to garner client interest across retail and institutional channels. Equity net inflows were $200 million, including reinvested distributions of $8 billion. While active equities continued to be impacted industry-wide by the risk-off environment, we saw positive net flows into all-cap growth, smart beta, all-cap value, equity income, large-cap value, and small-cap core strategies, among others. Although fixed income net outflows were $8.4 billion, client interests drove positive net flows into tax-efficient, global opportunistic, mortgage-backed securities, and multi-sector strategies. From a regional perspective, we continued to benefit from a regionally focused distribution model, which resulted in aggregate positive net flows in non-U.S. regions for the third consecutive quarter. For context, we now manage approximately $450 billion in non-U.S. markets, including emerging markets, that are poised to grow. Although the U.S. saw long-term net outflows, we were pleased to see our U.S. gross sales, excluding reinvested distributions, improve by approximately 15% from the prior quarter. We continue to see the benefit of offering investors strategies in a range of investment vehicles. ETFs, for instance, generated net inflows of approximately $1 billion, representing the fifth consecutive quarter with net flows of approximately $1 billion, resulting in over a 40% increase in ETF AUM from the prior year quarter. Including Putnam, ETF AUM is approximately $20 billion. Importantly, we now offer ETFs from a dozen different specialist investment managers, truly bringing the best Franklin Templeton has to offer to the market. Earlier this month, we launched one of the industry's first Bitcoin ETFs, consistent with our emphasis on innovation and staying ahead of disruptive technologies. SMAs continue to grow in popularity industry-wide as individual investors look to customize their portfolios. According to Cerulli Associates, SMAs represent about $2 trillion in assets and are expected to reach $2.9 trillion by 2026. Our SMA AUM ended the quarter at $125 billion and generated positive net flows for a third consecutive quarter. We continue to make progress with SMA strategies across platforms with Canvas, Muni Ladder, and Franklin Income Strategies, each in a positive flow territory for the quarter. Our institutional pipeline saw increased level of fundings this quarter, bringing our net unfunded mandates to over $13 billion. The pipeline remains diversified by asset class and across our specialist investment managers. Turning briefly to financial results, adjusted operating income declined by 18.5% to $417 million from the prior quarter and increased by 5.5% from the prior year quarter. We continue to focus on strong expense discipline, and our net cash and investments position allows us to continue to invest in growth and innovation for the benefit of clients, shareholders, and employees. Finally, in December, Franklin Templeton was recognized as one of the best places to work in money management by Pensions & Investments. This recognition is a source of pride for us, and the credit goes to all of our employees around the world who work tirelessly on behalf of our clients. I'd like to sincerely thank them for their hard work and dedication to our organization. Now let's open it up to your questions, operator. Thank you. If you would like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. We request that you limit to one initial question and one follow-up. First question comes from Alex Blostein from Goldman Sachs. Please go ahead. Hey, good morning, everybody. Thanks for the question. So maybe just to get some of the numbers questions out of the way, obviously with Putnam closed, maybe Matt, you can give us an update of a couple of items, but maybe one, where do you see the management fee excluding performance fees and kind of catch-up fees jumping off point for the first quarter, first calendar quarter of this year, and just broader updates, I guess, on accretion and contribution for Putnam for this year? Okay, Alex. I mean, that should probably just give you the full guide to put things into perspective, and that'll help get through the Putnam update also. So in terms of the effective fee rate, remember last quarter I mentioned we expected to be around 39 basis points consistent with previous quarters. We actually ended up at 39.7 or a little bit higher. The reason for that is about 1 basis point or 0.9 basis points was to do with the Lexington catch-up fees. So if you think about that for the second quarter, fiscal second quarter guide, we're expecting that to be consistent again, excluding these episodic catch-up fee or any other episodic management fee events, to about the high 38. So high 38 basis points, very consistent with the previous quarter and other quarters that we presented recently. So that's in terms of EFR. I'll give the annual EFR guide in a second, which includes Putnam because, of course, we closed Putnam on January 1. So our first full quarter will actually be this guide I'm giving you now. I thought it would be useful to provide the guide for the fiscal second quarter inclusive of Putnam, but I will call out the individual components of Putnam so you can see that we're being disciplined with our expenses around Franklin and being transparent about the difference between Franklin expenses and Putnam additions. So I mentioned the EFR already being in the high 38%, excluding any sort of one-off episodic revenue. In terms of compensation and benefits, assuming a $50 million performance fee quarter, including Putnam, we'd expect total comp and benefits to be approximately $815 million. This includes $65 million of comp and benefits for Putnam. Just for further perspective, we expect to be able to bring that down to about $50 million-$55 million by the end of the fiscal year. Again, this assumes $50 million of performance fees. Information systems and technology, we expect to be $155 million for the quarter. This includes $25 million for Putnam, and we expect to bring that $25 million down to between $15 million and $20 million by the time we reach the end of our fiscal year. Occupancy, we expect it to be approximately $80 million. Recall, in the last call, I mentioned that we're going to have a period of double rent based on our consolidation of New York City office space of $12 million. Last quarter, I mentioned $8 million, but that was only for a short quarter in terms of how long we're two months out of the three. For the double rent, this time we have for three months, which is $12 million for the double rent and $10 million for Putnam in this context. I wouldn't guide the $10 million down yet because we're still working on real estate optimization. And for G&A, we expect the consolidated amount to be $175 million, which includes $35 million for Putnam. We expect this to come down to about $30 million by the time we reach the end of our fiscal year. In terms of what this means for annual guide, you'll recall that in the last guide we gave, I mentioned that our fiscal 2024 at the then levels of markets and revenue expectations was expected to be about flat to 2023, excluding Putnam and excluding performance fees and excluding the double rent in New York City. I would now guide that amount, which excludes Putnam, to about 1%-2% higher, but that's because we now anticipate all else remaining or that revenue would be 5% higher for the year, including Putnam and excluding performance fees but including the $50 million of double rent. We would currently expect total adjusted operating expenses for fiscal 2024 to be about $4.55 billion-$4.6 billion. For perspective, this assumes the Putnam expenses addition to this is about $375 million-$380 million. In terms of the EFR, back to your first question, for the year inclusive of Putnam, because Putnam has a slightly lower effective fee rate, it brings the overall amount down to about 0.2 basis points. So it brings the number for the guide for the year to about the mid 38s, mid to slightly better than mid 38s. This excludes any catch-up fees, episodic fees, and performance fees, as I mentioned at the beginning. Great. Okay. I think I got all of that or most of it, and I'm sure folks will follow up as well. I guess my only other follow-up for you, I think we talked about Putnam being around $150 million contribution to operating income at the kind of exit run rate. Can we just get an update on where that stands now? Obviously, their asset base is a little bit higher as well, but just want to get a sense whether 150 is still kind of the run rate number we should be thinking about by the end of your fiscal year? Yeah. So just to break that down further so I start the call with all these numbers. But just to break this down a little bit further. So in terms of revenue, obviously, we don't normally guide revenue, but we want to be useful in terms of for modeling purposes. For the second quarter, again, fiscal second quarter, Putnam revenues standalone would be about $160 million. Of that, $135 million is management fee revenue, and $25 million is in the other revenue item. That's for the TA, basically. We would have say between $85 million and $100 million of expenses in the first nine months, so through our fiscal year, $85 million-$100 million. And by the time we reach the end of 9/30, the end of our fiscal year, our expense savings for the full 2025 would be at least $150 million. This translates to get specific to your question around operating income addition, Alex. This translates into probably between $150 million-$170 million of operating income contribution from the transaction. In terms of how we think this translates into, obviously, there's a lot of moving parts below the line, but how this translates into accretion dilution, it's probably just very slightly accretive, maybe $0.01 or something about that. In the second fiscal quarter for the first fiscal quarter that we'd have owned Putnam, it's accretive right away. And by the time we reach the full year, it's probably near a high single-digit cents accretion, and that translates into about a 3% accretive situation for full year 2024, remembering that's only 9 months of Putnam. But that's where we expect things to be, assuming revenue stays where it is today and markets stay where they are today and so on. Great. Okay. Super helpful. Thanks so much. I'll hop back in the queue. Thank you. The next question comes from Craig Siegenthaler from Bank of America. Please go ahead. Thanks. Good morning, everyone. Hope you're all doing well. My question is on the alternatives net flow trajectory. If we back out the two flagship fundraisers at Lexington and Benefit Street, there would have been a large swing in net flows over the last 12-18 months. So I wanted your perspective on the future trajectory in terms of net flows from alts. And are you expecting other funds to kind of step up and fill in that gap? Great. Thanks, Craig. So in the last two years, we have had about $40 billion in fundraising for our private markets. That was offset a bit by $12 billion in net outflows in the liquid alternatives. That just gives you a little bit of perspective there. We anticipate this year of fundraising between $10 billion and $15 billion in the private markets and would expect in this environment to have that translate into alternative asset revenue growth of the mid single digits. So far in Q1, you've probably seen that we raised $5 billion in the private markets and that between closing of Lexington's flagship fund and BSP. In the same period, we had about $1.1 billion in net outflows in the liquid alts. Just to kind of look forward for the rest of the year, and we can't talk about specific funds, but the areas that we think there's strong interest is alternative credit, specifically direct lending. We see interest both in the U.S. and Europe. There's opportunities in the alternative credit in special situations, opportunistic real estate debt, as well as CLOs. And just on that real estate debt point, as you see less and less of the regional banks having retracted in that space, we think there's both an opportunity to do very well there and strong client interest in that space. With respect to secondaries, just as a reminder, Lexington does a lot more than just their flagship offering. They have offerings in middle market and Coinvest offerings. 2023 was the third consecutive year where secondary industry surpassed $100 billion in the fundraiser. We think that there just continues to be strong demand and just, again, a supply and demand issue that keeps fees very high, where you had $6 trillion deployed in private equity and only, say, $150 billion deployed in secondaries and strong demand by the LPs and GPs because of liquidations being down and distributions being down to have a portion of their secondary portfolios picked up. With respect to real estate, our three largest funds at Clarion are perpetually fundraising. We see opportunities to continue to expand in Europe. And then we're incredibly excited about the success that we had in the Wealth Channel with Lexington, where 20% of the fundraise of Lex 10 fund came from the Wealth Channel. This has been years of building up our capabilities with FT Alternatives, where we built both a team of specialists, the 30+ specialists to help assist our wholesaling team. We've leveraged our academy to not only educate our own force but also to help our distribution partners educate their advisors on how to think about this. So it's a lot of years in the making, and we're really excited to see it come together with this fundraise. But that same expertise is going to be very helpful in both private credit as well as real estate. And Jenny, I would add two things in terms of the momentum we've had in the Wealth Channel. One is the success we've had to date with things like Lexington mean that we're able to now have more meaningful conversations with our distribution partners about calendar placement many quarters into the future, which really helps us plan our product launches. At the same time, we're now in a position where our distribution partners want to work with us to co-create products. So we're working on doing that together so that the products we come to market with in the Wealth Management Channel are meeting their needs. The final item is that a lot of our success to date has been in the U.S. markets in terms of wealth management, and we're now building out our specialist capabilities, our education, our academy, etc., in markets outside of the U.S. where we hope to have a similar level of success in the wealth management channels there. Thank you, guys. Thank you. The next question comes from Bill Katz from TD Cowen. Please go ahead. Okay. Thank you very much for taking the question. So first question, maybe switch up the conversation a little bit and just talk about capital. You announced a pretty sizable repurchase authorization, have some equity that you have issued in concert with the transaction for Putnam. Looking at your balance, it looks like you're seeing about sort of net cash of zero if you're sort of adjusting for the debt. How should we be thinking about maybe the tempo or pacing of capital deployment or buyback as we think through the year? Thank you. Yeah. Thanks, Bill. I'll take that. And then Jenny, maybe you'd like to comment also. So as usual, Bill, we're focused on making sure that we maintain our dividend in the same trajectory that's been on since the 1980s. We are very focused on organic growth investments. There is a ton going on, as you all know, in the industry, and there's a lot of call on capital for internal growth and internal projects and investments. So they're our two most important things. Then we've got debt service coming up this year of $250 million. Obviously, if the market becomes more reasonably priced in terms of debt, perhaps we access the debt markets at the end of the year or something like that. But we want to position ourselves to be able to pay that debt down with our cash. We're absolutely going to hedge our employee grants, as we always explain. And then what I'd say is that and this is sort of the interplay between M&A and share repurchases. We've been very active, obviously, as you know, in terms of M&A to make sure we've got the right strategies at both institutional and retail and so on, as we've discussed extensively. And when that slows down, which it has done for us, we've got one or two more payments in the next one to two years in terms of M&A. But once that's done, we'll be in a position where the M&A we look at is either much more strategic involving shares like we've done with Putnam, Great-West Lifeco, for example, or it's involving much smaller M&A transactions to fill in a few gaps that we've got. That means we can be more opportunistic with our share repurchases. As you've seen from the last couple of quarters, we certainly picked that up a little bit. But the backdrop is complicated. Market's quite volatile. There's a lot going on globally that influences the market. So we're constantly assessing that backdrop. But I would say that we would hope all else remaining equal to move into more of a capital return position, as we've demonstrated both with dividend and share repurchase over the last couple of quarters in the future versus just being very much focused on M&A. Okay. Super helpful. And this is a follow-up, Jenny, perhaps for yourself or Matt or Adam. Thanks for taking the questions. Any sense or can you give us an update on how the insurance mandates are the momentum is building there? I think there was some $20-odd billion that should flow in once the deal has been completed. And then how do you think about the backlog behind that? And maybe the broader question underneath that is, what are the early-stage discussions with the enhanced distribution opportunity now that the transaction is complete? Thank you. Well, so I mean, obviously, we have the $25 billion that we've talked about with Great West Life, and that will come in kind of through the year. And it's a mix of multiple of our SIMs with the bulk of it actually going to Western, but it has alternatives in there as well as fixed income and equity. And we announced that we're going to be a subadvisor for Venable. And part of that is because when we acquired Western, we acquired real expertise in understanding the insurance space, and we've been able to leverage that capability more broadly. But Adam, you want to talk about some additional things that you're seeing? Yeah. Look, I would say just in terms of scale, our insurance business is about $170 billion now, and that's not including the flows we've talked about from the power-related companies. So it's a very significant business, as Jenny said, to be successful in a lot of the general account area. You not only need to have investment expertise but really insurance domain-specific expertise, technology compliance. We're one of the few firms we think who combine both of those. And then the partnership with PowerCorp has also allowed us to co-create products with them that we think will be very successful in the marketplace, and you're seeing some launches there as well. The team there at Putnam has been very successful in the DC channel as well as in insurance. We think bringing those salespeople onto our team now that they have a wider array of products to sell will really hockey stick our efforts there as well. Just a little bit more perspective on the $25 billion, Bill, just to be clear. Right now, for all intents and purposes, for modeling purposes, we don't have any of that in. I mean, we have a little bit, but nothing's really hit the revenue line yet. We expect, as Jenny mentioned, about two-thirds of this to be kind of investment grade and a little bit emerging market and other corporate credit across a broad range of our specialist investment managers. As you think about modeling, I think it's probably appropriate to think about the effective fee rate being in the mid-teens. I think Jenny mentioned that as a whole. This will likely begin in earnest later on this quarter that we're in now, so kind of March time, maybe March, April, that sort of thing. And of course, we will update you. When we have large inflows associated with this, we'll provide that context and make sure we're transparent with you about when that comes in. But just to be clear, beyond the $25 billion, we expect to grow. There's a lot of opportunity to grow beyond the $25 billion. Even with this, we're just alongside other asset managers that also have important relationships with the Power Group of companies. So we're just alongside them, and we're increasing our market share, frankly, where it should be, aligned with the capabilities we've got and the size of our franchise. Thank you. Thank you. The next question comes from Dan Fannon from Jefferies. Please go ahead. Thanks. Good morning. A couple of clarifications, Matt. Just want to confirm the 1Q guide for comp that was, I believe, $815 million or around that, included $50 million of performance fees. Did the full-year guide of the $455 million-$466 million assume a $50 million-a-quarter performance fee contribution? Yes, plus the 93 that we had in the first quarter. So it's 93, 50, 50, 50. Yeah. Got it. Okay. That's helpful. And then just on the Lexington, I'd like to just clarify what's in the numbers now in terms of AUM and flows that we've seen as of 12/31. And then in terms of catch-up fees, we got the disclosure for this quarter and last, but should we assume, given the final close in January, another round of catch-up fees here for the March quarter? There's no more catch-up fees to book at this point. The fund had its last fundraising by 12/31, and that's when they sent the press release out that indicated that we have $22.7 billion of additional AUM. That's all included in our reported numbers. And then would BSP's fundraise be in there as well as of 12/31? No, not yet. Okay. Understood. Thank you. Thank you. Thank you. The next question comes from Brennan Hawken from UBS. Please go ahead. Thanks for taking my questions. You spoke earlier about fixed income and the attractiveness and demand and a shift from cash and short-duration investments. What are you specifically seeing as far as RFP activity? And could you talk about Western and their level of engagement with their client base? Yeah. So Brennan, maybe just a little bit of color kind of on the industry. Everybody talks about the $7.7 trillion in money market funds and what's going to be transferring from cash into other investments. And first of all, Western's money market fund is primarily institutional, and institutions tend to build in the first two quarters and then spend in the second two quarters. Having said that, we don't have a meaningful presence in the retail money market business. However, obviously, if you have relationships with those distributors, which we do, that's where you're going to capture the transition. So even if you don't have the money market funds, it doesn't mean you don't get the transition. So we've had actually good interest and positive flows in some categories in our fixed income. Unfortunately, it's masked a bit by some performance challenges we've had in the core strategies. Over half of our top 10 gross-selling funds are in the fixed income space. Actually, from a vehicle standpoint, we're positive flows in ETFs and our income ladder SMAs. It's really important to think about this as being vehicle-agnostic. Our fixed income gross sales are up 8%. We've had the greatest portion of our institutional pipeline is actually fixed income in multi-sector credit, high-yield, global income. Western, to your question about Western, they represent the largest portion of that. Western's having good conversations. Our clients have been have a lot of very good performing strategies but have struggled, obviously, in their core strategy. We're positive in things like tax-efficient, global opportunistic, mortgage-backed securities. But I think the most and by the way, Putnam brings in really top-performing fixed income performance as well, plus additional products and things like stable value, ultra-short duration, intermediate core, and really good performance in immunities as well. So we think cash is still attractive. And frankly, some people would argue the risk-reward, you have cash yielding 5% and say high-yield yielding 7.5%, that you're not going to see the full rotation until you see some rate cuts as opposed to just peaking. And we just think we're incredibly well-positioned both in public fixed income, traditional fixed income, as well as private credit to be able to capture this. And our view is what we're seeing demonstrates that we're well-positioned there. I don't know, Adam, if you want to add anything. Yeah. Jenny, I would just add that I think you're spot on that we've really seen strength in a number of areas of fixed income that was masked by some of the outflows in core and core plus. But the performance in core and core plus turned around. If you take a look at the end of the year, core's up 37 basis points on the index, core plus 124. And traditionally, those products get very, very strong inflows after the Fed stops hiking. So we're in the position now from a performance standpoint as well as in the rate cycle where those products are poised to do quite well. Great. Thank you for all that color. And then just, Matthew, I wanted to reconfirm because a lot of times when you speak to expenses, you speak to it X some items. But it sounds like the 4.55 and the 4.6 for the fiscal quarter would be inclusive of the double rent. It would also include the actual performances from this past quarter plus the 50 expected the next few as well as the nine months of Putnam. Do I have that correct? That's right. Yes. And just to the reason why I went through the detailed idea is because I want to be very clear that if you take Putnam out of the equation, our expenses are up like 1% or something like that year-over-year. And that's only because and again, we don't normally talk about revenue from a guide perspective. It's almost impossible to guide, as you know. But that does assume 5% higher revenue. So if you often, people ask us about margin, the relationship between revenue and expenses and operating leverage in the system. Well, you can see that if we expect revenue to go up 5%, we only expect our expenses to go up between 1% and 2% on a foundational level. And then in addition to that, we're adding Putnam. But of course, we're in the process of reducing expenses around the Putnam acquisition. That's when you get to all these when you put all that together, you get to the $4.55 billion-$4.6 billion. Next year, we expect that to be a further reduction in expenses. I mentioned $375 million for nine months of expenses for Putnam. We expect on a dollar-for-dollar basis for that to come down for 2025. I said to you that for the year, we expect to actually realize $85 million-$100 million of expense savings from the Putnam transaction. For a full year, that's $150 million at least in expense savings. And that's what translates into about the $150 million-$170 million of operating income addition. Yeah. And that 150, that's the run rate when you exit your fiscal year, basically, right? That's exactly right. Yeah. So on the last day, at the very least, on the, I think we could be a little bit better than this. But on the last day, 9:30 A.M., when you times that number of savings by the year, it's $150 million at least. Thank you. Thank you. Thank you. The next question comes from Michael Cyprys from Morgan Stanley. Please go ahead. Hey. Good morning. Thanks for taking the question. I wanted to ask about retirement with Putnam and the Great-West strategic relationship. This accelerates your push into the retirement channels. Hope you could talk about some of the steps you're taking and may take over the next 12 months to capture the growth opportunity that you see. Maybe you could elaborate on that as well as which products you think might resonate the most. Thanks. Adam, you want to take that? Sure. Thanks, Mike. Thanks, Mike. Thanks, Mike. Yeah. So first of all, the Putnam acquisition gave us capabilities. And I think those capabilities are really important in terms of things like stable value, where there's $18 billion in assets, ultra-short, and target date. If you take a look at target date, it's a third of industry DC AUM right now, had $150 billion in net flow last year. We can now play in that segment where we haven't really been able to play effectively historically. So from a product standpoint, we're in a much stronger position. I would also say that from a sales force position, when we took folks in from Putnam, one of the areas where we added most significantly was in that retirement and somewhat in the insurance channel as well. So we just have a much, much larger field force. So that lets us be better partners, both of those things, both the expanded field force, the expanded products. We're better partners with the Power-related companies, but with all of our insurance partners. I think that's what's really important to mention is this is not just about being stronger with one partner. It's about being stronger in insurance and retirement across the board. Putnam's DC assets are about 30% of overall AUM. It's just a real strength. Bringing that DNA into Franklin will be a real benefit. The relationship with Empower allows us to build some custom products together that we can go to market with that we think will really help us win because we can have multiple sales forces now selling the same products, which just gives us leverage. Great. Thanks. And just a follow-up question on the technology front. Just curious how you're thinking about front-to-back outsourcing opportunities and evolving the tech stack from here. Maybe you could speak to some of the opportunities that you might see from improving data integration across the multiple systems that you have, what sort of factors go into consideration, and any sort of lessons learned you might take away from others that have partnered externally on this front. Yeah. Thanks, Mike. I'll take that. And then Jenny, maybe would like to comment because we're all very involved in these very critical decisions for the company. So as you know, we outsourced transfer agency, fund administration, and parts of our technology, as we've described beforehand. We then moved on to understanding the potential opportunity for effectively partnering with one single provider for our investment technology platform. That's a huge undertaking, a process that takes a year, 18 months, just to go through all the analysis. What I'd say on this is the number one point is, and most important to ask candidly, is that all of our specialist investment teams are on board with moving to a single investment technology platform. We've done a huge amount of work. And I'd say that we are close to deciding on who that partner should be. It's going to be a long time to implement. I wish it was faster, but it's slower. It's a very long and complicated process. It's probably going to take something like three years to implement. So to give you guides on expense reductions and how it's going to be applied internally is really premature at this stage. But we are encouraged by what we see and what we think we can achieve from this transaction. But candidly, there's so many other demands to invest, like artificial intelligence, data, additional teams, and resources that they require to be leading in the industry that while we expect long-term savings to be meaningful over time, we've got a lot of other things to circulate those savings into. But again, we'll share that with you when we're through the process with the partner that we expect to announce here in the coming quarter or two or so. So that's sort of the update. I don't know whether, Jenny, you want to add anything to that. Nope, Matt. That was perfect. Great. Thanks so much. Thank you. The next question comes from Patrick Davitt from from Autonomous. Please go ahead. Hey. Good morning, everyone. First, on Putnam, as we try to kind of level set our model expectations, could you give an update on how the net flow picture tracked from announcement through the December quarter with and without reinvested dividends? Yes. Excluding reinvested dividends, it's slightly positive. Now, obviously, we closed the transaction, as you know, Patrick, on January 1, I'd say, in the quarter before that. And the period we're in now, it's kind of flattish excluding reinvested dividends. So slightly positive. Got it. I'm just going to throw one thing in. I mean, Putnam's got 85% of their AUM beating their peers in all-time periods. 87% of their mutual funds are or 91% of their mutual funds are rated four and five-star ratings. So both on the equity and fixed income, they've got phenomenal performance. Great. Thanks. And then one housekeeping item. It wasn't clear to me earlier when you were talking about this, but the $5.5 billion-ish win from Great-West announced last week, is that a part of the $25 billion, or should we consider it incremental? So the. Incremental. Yeah. I think that's from the yeah, from the retirement channel, so. It is incremental. It's incremental. Incremental. Great. Thank you. Thank you. And the next question comes from Brian Bedell from Deutsche Bank. Please go ahead. Great. Thanks. Good morning. Thanks for taking my questions. I just want one clarification also. I think I'm not sure who mentioned this, but the alternative was, I think, the $5 billion of private markets. Hopefully, I wrote this down correctly. $5 billion of private markets, less about $1 billion of liquid loss. Was that for the quarter just reported or for the current March quarter? Well, so BSP, so they closed their fund in this quarter. And so you don't see those flows in last quarter. So we're talking about in Matt, what was the date that they closed? The 4.7? Selene, what was it? Like a week ago or something like that. It's this quarter. Just the difference, BSP charges when they call capital. They don't have catch-up fees like Lexington does. Yeah. Perfect. Okay. That clarifies that. And then just more broadly, I guess, just the ETF franchise has been growing nicely. Maybe, Jenny, if you want to and Adam also or Matt, just talk about your long-term vision for active semi-transparent ETFs. You've already got 12 managers using these products, you're up to $20 billion in the total ETF, which, of course, includes a lot of smart data. But just how you're thinking about this over, say, the next two or three years, the demand from the marketplace for ETFs, whether you think it might cannibalize mutual funds or you actually think you can develop strategies that will be incrementally growing sales on top of your mutual funds franchise? Yeah. So I think the key to think about with ETFs and, frankly, SMAs, a lot of the growth is driven from the fact that the world has moved more towards fee-based and how distribution fees are paid and things like traditional mutual funds and then, obviously, the tax efficiencies in ETFs. So we view it as our expertise is our risk-adjusted investment capabilities, risk-adjusted returns. We have a very small passive suite in the ETFs, but we really focus on active management. And we are agnostic to the vehicle in which we deliver that. So we look at an ETF as a vehicle which works really well in certain channels. On the wealth side, you're starting to see more growth internationally in ETFs, more discussions, like in places I just came from, Asia where you haven't seen the kind of penetration there, but they're interested in them. Things like SMAs are also very much growing in the wealth channel. We look at Canvas as a great way to bring tax optimization to the SMA platform so that it can be leveraged as a tool to provide tax-efficient, active SMAs to the market. We've had close to $1 billion a quarter in flows in the ETFs. I think we're now over $21 billion when we've added Putnam into it and have had really great success diversifying our strategies into these other types of vehicles. So the Franklin Income Fund, now we have the Franklin Income Focus ETF, which has, again, been really well received in the market since it was launched, as well as having traction outside the U.S. So ETFs are incredibly important to us. Yes, it'll probably cannibalize some of the mutual funds. But in our case, where we have been underpenetrated in the areas of retirement, that's actually been an area where the tax benefit of ETFs hasn't made a difference. And you're seeing very strong support for mutual funds in the retirement channel. So as we grow there, we're able to make up for any of that cannibalization in that retirement channel while also growing our ETFs. So, Adam, maybe you want to add anything to that? Yeah. I would just reiterate the point that for us, ETFs is about the vehicle, not about being passive. Just to put some numbers around that, 24% of our assets are smart data, and 36% are active. So our passive ETF business, it's only 40% of our AUM is in passive. And it was only 20% passive was only 20% of our ETF flow for the quarter. So as more and more people begin to consider active management within an ETF wrapper, we think that's great to us. And to the point about cannibalization, we would also say that direct indexing is the real threat to mutual funds. And that's where we're so thrilled to have Canvas on board to see the growth there, to see our ability to actually use Canvas to manage active portfolios now as well. We think that puts us in a very good position. I think that Canvas, the direct indexing, is more of a threat to the passive mutual fund that has, yeah, and passive ETFs. Yep. Yep. That's great, Heather. Thank you so much. We had another question come in to clarify a point around guidance on performance fees. So just to be clear, the $815 million guide that I gave around the fiscal second quarter guidance includes an assumption of $50 million of performance fees. The annual guide of $4.55-$4.6 billion is excluding performance fees. Just as you know, we always give out annual guides excluding performance fees. I just want to be clear on that. That's fully inclusive of Putnam. It includes the double rent, but it excludes performance fees. Thank you. 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. Great. Well, thank you, everybody, for participating in today's call. Once again, I just want to thank our employees for their hard work and dedication to be able to deliver this quarter. We look forward to speaking to you all again next quarter. Thanks, everybody. Thank you. This concludes today's conference call. You may now disconnect.