Welcome to Franklin Resources' earnings conference call for the quarter ended December 31st, 2024. Hello, my name is Matt, and I'll 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'd like to turn the conference over to your host, Selene Oh, Chief Communications Officer and Head of Affairs and Relations for Franklin Resources. Thank you. 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. that 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. Welcome, and thank you for joining us to discuss Franklin Templeton's fiscal quarter results. I'm here with Matt Nicholls, our CFO and COO, and Adam Spector, our Head of Global Distribution. We'll answer your questions shortly, but first, I will review the quarter's highlights. Over the past few months, I've traveled across Europe, the Middle East, and Asia, and met with key clients ranging from wealth clients to institutions and sovereign wealth funds to other large asset owners. What's clear to me from these conversations is that clients want deeper relationships with fewer asset managers that can meet more of their needs. As one of the few global asset managers with extensive public and private market strategies, we believe we are well-positioned to be a trusted advisor to our clients around the world. In recent years, we have intentionally diversified our company across specialist investment managers, asset classes, vehicles, and geographies to benefit a broad range of clients through various market conditions and cycles. Ever since we opened our first offices outside of North America 40 years ago, our global presence and perspective has been a strategic advantage, enabling us to reach new investors. Today, our global footprint includes offices in over 30 countries, serving clients in over 150, and represents approximately $475 billion in assets under management. During our first fiscal quarter, market volatility ticked higher with geopolitical uncertainty, the U.S. presidential election, central bank actions, and inflation. Starting with public equity markets, global equities fell by about 1% during the quarter, while the S&P 500 posted a total return of 2.4%, and the NASDAQ 100 notched a 5% gain. The U.S. Equity markets saw positive returns, while other regions like Europe, the U.K., Japan, China, and emerging markets faced pressure, in part due to the U.S. presidential election results, trade tariff concerns, and economic growth uncertainties. While equity markets' returns were a bit more modest than the three previous quarters, the major trends remained in place. The U.S. large caps outperforming U.S. small caps driven by technology and communication services firms. Growth stocks in the U.S. outperformed value stocks for both the quarter and the year. The largest gains came from tech and consumer, while materials and healthcare lagged. International equity markets stalled in Q4 but still delivered positive returns for the year. In the coming year, our investment management teams believe that earnings growth is likely to support higher valuations across global equity markets, with the U.S. continuing to lead the way. We also believe that dispersion within global equity markets will continue to increase, meaning that top performers should come from more than just mega-cap tech companies, and we've seen signs of this starting to play out in the December quarter and more pronounced this week as DeepSeek raised questions about the race to capture value from AI. This dispersion favors active management and the ability to move quickly in today's dynamic markets. Valuations are likely to come more into focus, and skilled active managers can identify mispriced securities to generate alpha. It's also a reminder that investors should focus on balance and diversification of their portfolios. Meanwhile, turning to the rate market, investor focus is centered on two issues: the inflation picture and uncertainty surrounding the policies of the new U.S. administration. Following robust U.S. Growth numbers and relatively sticky inflation data, we expect the Fed to adopt a prudent pause in its easing over the next several months, something the markets may have overestimated. Early U.S. government economic policy moves, especially on regulations and tariffs, could solidify expectations of sustained robust growth, which in turn would point to some inflationary pressures. We see uncertainty remaining elevated for a while as markets try to anticipate U.S. fiscal policy and distinguish between rhetoric and reality regarding proposed tariffs. So what does this mean for fixed income markets? The yield curve continues to steepen, and over time, investors will benefit from going up the curve. As the Fed's rate-cutting cycle seems close to an end, traditional fixed income sectors are regaining their role as a primary source for yield. Given the still robust pace of activity in spread sectors, our fixed income managers continue to find opportunities at attractive yields even as spreads remain relatively tight. Turning to the private markets, as valuations have reset from their 2021 levels, we believe that allocating capital in the coming year looks attractive across much of the private market ecosystem. Specifically, we see opportunities in secondaries, real estate equity, and real estate debt. We believe funds that deploy capital in today's market environment can negotiate favorable pricing, terms, and covenants, with product evolution making these investments more accessible to a larger group of investors and with more flexible features. Financial professionals are increasingly allocating client assets in these versatile and valuable strategies. A tremendous opportunity exists with global money market assets at record highs of $8.9 trillion as of December 31st, according to Morningstar. Investors who have sat on the sidelines have not been able to capture significant returns over the past couple of years. As one of the world's most comprehensive asset managers, our broad investment capabilities, extensive global distribution network, and local asset management expertise continue to differentiate us in an increasingly competitive industry and allow us to be well-positioned to capture money in motion. In fact, just this week, we were appointed as Trustee and Manager of the National Investment Fund of Uzbekistan. We are pleased to partner with the government of Uzbekistan in support of the development of their local capital markets. For over 15 years, we have actively managed similar specialized emerging markets mandates, including Fondul Proprietatea, a London and Bucharest-listed Romanian closed-end fund. Turning now to our business, our first fiscal quarter results demonstrated progress across our key growth areas, enabling us to meet the needs of our clients amid heightened market volatility. Our AUM continues to be well-diversified across asset class, client type, and region, and ended the quarter at $1.58 trillion, a decrease from the prior quarter due to negative markets and long-term net outflows from Western Asset. Excluding reinvested distributions, long-term inflows improved by 34% from the prior year quarter. Long-term net outflows were $50 billion, including $20 billion of reinvested distributions. Excluding Western Asset Management, our long-term net inflows were approximately $18 billion and positive in every asset class. Three of our asset classes, equity, multi-asset, and alternatives, generated a combined $17 billion in positive net flows. Equity net inflows were $12.5 billion and included reinvested distributions of $16.5 billion. We saw positive net flows into large-cap value, smart beta quantitative, listed infrastructure, and all-cap core strategies. Investment performance continues to be strong across all periods as investors return to risk assets. Fixed income net outflows were $66.7 billion. Excluding Western Asset, fixed income net inflows were positive into multi-sector, core bond, and high-yield strategies. As highlighted on previous calls, we benefit from our broad range of fixed income strategies with non-correlated investment philosophies. Brandywine Global and FT Fixed Income both generated positive net flows, totaling a combined $1 billion in fixed income strategies in the quarter. This past year has presented significant challenges for Western Asset Management, and we are committed to supporting them. In the near term, we will integrate select corporate functions, creating efficiencies and giving access to broader resources while ensuring Western Asset's investment team autonomy. These enhancements will be seamless for clients. This quarter, fundraising and alternatives generated $6 billion, of which private market assets totaled $4.3 billion. Aggregate realizations and distributions were $3.8 billion. In January, we launched our first evergreen secondaries private equity fund, the Franklin Lexington Private Markets Fund, designed for the wealth channel. The fund achieved an initial fundraising cap of $900 million in assets under management. We have also launched a parallel product internationally. Today, our evergreen funds are reaching an important milestone of nearly $1 billion in AUM for each of our alternative managers: Franklin Lexington Private Markets Fund in secondary private equity, BSP Real Estate Debt, and Clarion Partners Real Estate Income Fund. These are semi-liquid perpetual vehicles, and we look forward to further capital subscriptions. These are great examples of how our wealth management alternatives business, Alternatives by Franklin Templeton, has all the essential elements to win in this space. Over the past few years, we have focused on designing innovative, suitable products, investing in client education, and supporting wealth advisors. Our large local distribution coverage model is comprised of a dedicated alternative specialist team that works with our overall sales force. The wealth channel is approximately 10% of our alternative AUM. Looking ahead as allocation to alternatives increases and we launch products in the channel, we expect wealth clients to gradually grow to represent 20%-30% of our alternative capital raises. Multi-asset net inflows were $3.4 billion, led by Franklin Income Fund, our custom indexing platform, Canvas, and Franklin Templeton Investment Solutions. Income and yield continue to be top of mind for investors. Franklin Income Fund's flexible approach enables it to invest in dividend-paying stocks, bonds, and convertible securities and is a great example of a strategy in high demand across multiple geographies and in different vehicles. The investment solutions team leverages a global network of investment teams across our specialist investment managers to offer innovative and diversified strategies, including private strategies, and ended the quarter with $88 billion in AUM. Turning to investment vehicles, clients showed interest in a diverse range of investment options, including ETFs, retail SMAs, and Canvas. Our ETF business saw its 13th consecutive quarter of positive net flows, attracting $2.7 billion during Q1. Nine of our ETFs now are over $1 billion in AUM. From an asset class perspective, eight of these nine funds are equity strategies, and the largest ETF being Franklin U.S. Core Bond with $2.3 billion in assets. Retail SMA AUM was $146 billion, and excluding Western, had net inflows of $2.5 billion. Canvas, a web-based software platform, allows financial professionals to create personalized SMAs for their clients, including tax-managed efficient products, and has enhanced our leadership in SMAs. Through the use of technology, we continue to partner closely with clients to develop personalized portfolio solutions. Canvas had record net flows of $900 million with AUM of $10.5 billion, a 10% increase from the prior quarter. At quarter-end, our institutional pipeline of committed but unfunded mandates increased by $2.3 billion to $18.1 billion in AUM and remains diversified across asset classes and specialist investment managers. Despite the challenges with Western Asset, fixed income mandates have grown and now represent 45% of the pipeline. Before I turn to investment performance, I wanted to provide a brief update on Western Asset Management. In the quarter, Western Asset experienced significantly higher long-term net outflows of $68 billion, of which $38 billion of it occurred in the month of December. By December 31st, Western Asset managed $272 billion in AUM across 88 marketed strategies. While it's preliminary, as we report January AUM inflows next week, Western's long-term net outflows are expected to be approximately $17 billion for the month of January and had AUM of approximately $260 billion. Excluding Western, we expect long-term net inflows of approximately $4.5 billion. Now, in terms of investment performance, our investment teams have remained true to their distinct disciplines and time-tested approaches and continue to produce competitive investment returns. Mutual fund investment performance improved in the three- and five-year periods from the prior quarter across all asset classes was unchanged, but the 10-year period and the modest decline in the one-year period was primarily due to U.S. equity strategies. Two-thirds of mutual fund AUM outperformed their respective peers over the three-year period. Compared to the prior quarter, composite investment performance improved in the three-year period, stayed relatively flat in the 10-year period, and declined in the one and five-year periods. More than half of the AUM in our strategy composites are beating their respective benchmarks for the three and five-year periods and 63% in the 10-year period. Turning briefly to financial results, adjusted operating income was $412.8 million, a decrease of 9% from the prior quarter and a decrease of 1% from the prior year quarter. In connection with Western and as a whole, we will be implementing additional cost savings initiatives during fiscal 2025, of which the benefits will be realized in fiscal 2026. We remain committed to our long-term vision of strategically investing in the business to best serve our clients while managing expenses and maintaining our focus on enhancing shareholder value. Looking ahead, I'm excited about the many opportunopportunitiesities we have to drive growth and innovation. With a clear vision and strong progress already underway, we're focused on elevating the performance of our investment strategies, outstanding client experience, and continued growth in our most critical areas. This month, we announced the launch of an exciting new U.S. advertising campaign, "Your Trusted Partner for What's Ahead." This campaign highlights Franklin Templeton's rich legacy of evolving with our clients' needs while showcasing the breadth of our capabilities for financial professionals. Some of the highlighted capabilities include our public and alternative investments, customized solutions, Canvas, ETFs, and SMAs. Finally, in December, Franklin Templeton was recognized again as one of the best places to work in money management by Pensions & Investments. I'm proud to lead such talented and dedicated employees who work tirelessly on behalf of our clients, and I'd like to thank them for their hard work and dedication to our organization. Now, let's open up the call to your questions. Operator? Great, thank you. If you'd 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 question to allow for additional participants on this call this morning. Our first question here is from Alex Blostein from Goldman Sachs. Please go ahead. Hey, good morning, everybody. Thank you for taking the question. Since it's only one per person for now, maybe we'll start with Western. Appreciate the update on AUM and obviously outflows in January. It continues to be obviously a pretty challenging picture, but can you help us frame the operating income and management fee contribution from Western, kind of where that stands today? And I guess more importantly, I know it's going to be hard to ring-fence where this whole thing ultimately ends up in terms of size, but what is kind of the strategic vision for Western, however much smaller it gets from here? So I know you talked about integrating some of the selected corporate functions. What kind of savings do you anticipate from that? And just maybe help us think about what Western could look like over the next couple of quarters as things settle down. Thanks, Alex. I'll address a little bit on the strategic side and then turn over to Matt on kind of the financial framing. Look, our model has always been that we support the independence of the investment teams and we integrate kind of the rest of the business at the center. And obviously, we've done a lot of acquisitions over the past five years, and it takes time to do that. And as you know, Western was independent, but that's what the initiative is, is to basically maintain the independence of that investment team and things like fund accounting, even some of the technology and other areas. And we're looking at all this to integrate it into the broader firm so that we get greater scale, we can make investments in things like AI and data. And so it's really a natural evolution of that, and that work is underway. And Matt, you want to talk about the impact? Yeah, yeah. Good morning, Alex. So in terms of financial impact of Western, I'll mention a couple of things, then put it into context of talking about the annual impact through 2025 and then into 2026. I think that's probably the most useful way of looking at it. So in terms of financial impact, if you run rate the current revenue impact of Western outflows of approximately $120 billion, this is from August through to the end of January, it equates to about 30% of Western's full year 2024 adjusted revenue. That equates to about 3%, 3% of Franklin's full year 2024 adjusted revenue. The run rate remaining revenue of Western equates to about 6% of Franklin's adjusted revenue. The impact on operating income will obviously be greater, as I mentioned in the last quarter, for a period of time, given that expenses need to catch up with revenue declines. We're being, as Jenny mentioned, supportive, methodical, but that shouldn't be confused with not being disciplined. We're being super disciplined about how we tackle this. Top of mind, though, is to ensure continued excellence in terms of client experience with Western and obviously all of Franklin. So specifically, as Jenny mentioned, Franklin Resources is assisting significantly by accelerating the end of our five-year autonomous agreement with Western, which expires in July this year. This will enable us to implement the integration of certain corporate functions that Jenny referenced that will result in Western being able to capture the benefits of a much larger scaled asset management operation, while, again, as Jenny mentioned, retaining investment team autonomy. I think in terms of the sort of margin impact, it's important to look at the year. We do expect our expenses for the year to be, if you normalize for a full year of Putnam and then exclude performance fees, we expect it to be roughly even with last year, very similar to last year's expenses, let's say adjusted expenses. We continue to make important strategic investments and funding them with cost saved elsewhere in the business. We expect the impact of our support of Western and integration of certain functions of Western to reduce our margin by a little bit in the short term, let's say over the next quarter or so, and then experience margin expansion again in fiscal 2026, remembering that starts for us in October, October 1. For further perspective, which is why normally we wouldn't talk about 2026, but in this context, I think it's important to explain it. For further perspective, we expect our expense initiatives that we're working on now in 2025 to position us to enter fiscal 2026 with the equivalent of about $200 million-$250 million of expense run rate expense reductions. You asked about the effective fee rate of Western Asset. It's currently 16.5 basis points. In general, obviously, look, we don't give revenue guides. All of this assumes flat markets, but we do expect the lower fee revenue from Western to be replaced over time with other areas of growth, which Jenny referenced on her prepared remarks. Franklin Fixed Income, alternatives, ETFs, Canvas solutions, and even other pockets of growth within Western itself. That obviously will add to the margin recovery. This is sort of a two-pronged thing. You have obviously expense discipline and expense reductions that will happen, start to begin in 2025, but the effect on our margin, the positive effect on our margin, margin expansion won't happen until you get into 2026, and then obviously another layer of margin expansion is on the revenue side that I just mentioned, and then finally, we gave margin guidance or margin targets, let's say, at our year-end call, and we've referenced a medium-term target of 30%, and that remains exactly the same. We're not changing any of the targets that we talked about at year-end. And I'm just going to add one other thing, Alex. Could you ask about kind of strategic? This having nothing to do with the issues at Western at the moment, it would be remiss in not acknowledging just how much the fixed income landscape has changed, and that may then trigger kind of a look over time at how you're structured. So what do I mean by that? Let's face it, banks don't play the same traditional role. They're not obviously lending in the same way that they used to. If you talk to private credit managers, often their number one focus is sourcing of deals as opposed to just raising money. So if you think about that function becoming more important in private credit, you can imagine as you're building those sourcing relationships, like BSP has a lot of relationships with middle market companies and obviously sponsor firms, PE firms. As you build that, you can see how that evolves in the conversation becomes, well, if you want to do private, this is what the structure looks like. If you want to do traditional fixed income, this is what it looks like. And so that is something that we are thinking about. That is not. There's no kind of organizational impacts or things in 2025 and maybe not even in 2026, but it is something that we are, as we look at ourselves as somewhere around a $500 billion fixed income manager with all these different groups, what should the right structure ultimately be? Great. Yeah, that's really helpful detail. Thank you both. Thank you. Our next question is from Dan Fannon of Jefferies. Please go ahead. Thanks. Good morning. So a lot there in the first response. So just to follow up, just to make sure I understand, the $200-$250 million of additional savings, that is going to be beyond the flat, including Putnam for fiscal 2025. So as we think about 2026, you'll have natural growth plus that savings that should be for the full year. Right. But if we have flat markets from today, we're not going to increase our expenses for 2025. It'd be flat to down a little bit. So the $250 million is incremental to that for 2026. And we would expect to have a full $250 million for 2026. In other words, the work to achieve those cost savings from a run rate perspective, we would expect that to be starting in October 1 in earnest. Great. That's helpful. And then just in a similar kind of vein, is there any other affiliate like Western that is not on a profit share as you go through this integration, or are there other integrations of smaller affiliates or recent deals that could be part of that improvement in efficiencies? The only one that is, Matt. You could talk about the financial impact, but the only one that still, first of all, the alts managers. You don't get the same kind of scale by integration. The legal department and the alts manager is a deal team, not usually sort of a 40-Act kind of team. And so there's not. Those are really pretty standalone. As far as the traditional managers, Royce is still pretty independent and runs a lot of their own operations, but they're really the last one. All the others, they all look a little bit different but have either been integrated or at various levels of integration that's happening. Yeah. Look, when we acquired Legg Mason, we quite purposely agreed to various levels of autonomy over set periods of time because it's not possible to integrate and consolidate operations in a quick, methodical way that we believe is safe and sound. So essentially, we had a set timeline over a period of five years over which these various operational scale initiatives were planned. At the end of the day, Western was the last one on the list because they're so big and scaled themselves with their own autonomous independent operation. That's the way it worked. However, looking forward, you could think of our company in a much more simplistic way. On the public market side, we're going to have one scaled operation supporting a series of investment teams, some of which have their own brands because they're synonymous with a certain style of investing and what our clients demand from us. And then the second part of the company is the alternative asset businesses that require very specialized operations to support them. And so that's basically the way to look at it. You have the liquid sort of public markets business on the one hand, enjoying the scaled operation on a global level, and then you have the alternative asset groups on the other. Great. Thank you. Our next question is from Michael Cyprys from Morgan Stanley. Please go ahead. Hey, good morning. Thanks for taking the question. Just wanted to ask about Putnam. I think it's been about a year since you guys have closed the transaction there. I was hoping maybe you could just update us on the progress, the synergies there. The flow picture seems to be perhaps a lot better than people may have thought, perhaps a decrease in as well. So just curious if you could update us on that as well as the strategic partnership that you have with Great-West and the scope for additional growth and flows there. Yeah. Why don't I do the first one, then Jenny and Adam would do the partnership with Great-West Life. I mean, obviously, it's not very often when you say in the asset management landscape, when you do strategic transactions, they're quite complicated. Human capital issues happen, and you do your best when you enter into transactions, and it's never perfect by any stretch. The Putnam acquisition for us has really been the definition of a home run in many ways, both in terms of flows. The flow trajectory has been very significant, I think, for the 12 months since we closed the transaction. I think the net new flows, excluding reinvested dividends, is something like $15 billion approximately. And that's not the exact number. It's $12-$15 billion. Let's say it's been $1 billion a month, pretty much, net new flows. The performance has been outstanding. The team and the team fit, culturally, importantly, has been a very good fit with the rest of Franklin. And culturally, they're an incredibly disciplined team that have been through a lot together, and it meshed very, very well with Franklin. It's sort of a great combination where you've got an example of where when you've got something that really performs well with a team that's gelled well together, combined with very powerful global distribution, what those two things, when they come together, can create. That's what we've done. In terms of the financial impact of the transaction, we had announced about we were going to go from pretty much zero margin to 30% margin, which would have been $150 million of operating income on a 12-month level. We're certainly a little bit ahead of that. We're probably $25 million or more ahead of that, $175-$180 million. Obviously, we're not reporting independent teams this way, but obviously, it's only been 12 months, so we can a little bit more so we can give you that context. We're delighted with the team, delighted with the performance, and very pleased both financially and how it's worked for our customers and from a distribution and product perspective. Adam and Jenny, I think you want to comment on the rest of it. Yeah. Thank you. I would say that the great thing about Putnam is it shows really what can happen when we bring a tremendous investment team that didn't necessarily have scaled distribution together with scaled distribution. That's really what's happened. Their performance has remained really, really quite good. I think they have 89% outperforming in the one year, 91%, 89%, and 90%, with 87% of their assets, four stars or better. Really strong performance. But with scaled distribution, if you take a look at this quarter versus a year ago, gross is up over two times, and their net is up over seven times, and they had $13.6 billion of flow in the Q1. So just really strong results. The core sales there is also what's really important. If we take a look at how much the regular sales, mutual fund sales are growing, that's what's driving things significantly. You also asked, I think, about the partnership with Power Group. That's going quite well. We have a deep embedded relationship with Empower, where we're building some new products together and seeing significant interest generated in some smaller planned retirement products. We are beginning to build out with them outside of the U.S. We have a good general account relationship. And then the other thing that Putnam really brought us was significant expertise in the retirement channel, where we have a very scaled team who specialized in retirement, but importantly, also the right retirement products now with the target date suite that's about $18 billion and a stable value product that's about $17 billion with really stellar performance. And I think, sorry, one other thing we should have added, and then I know Jenny is going to comment on the Great-West Lifeco, the broader relationship, is it's not just about the Putnam has been terrific, but it's also helped with our work and strategic work around our other key teams in equities: Franklin Equity Group, Franklin Mutual Series, ClearBridge. These are all tremendous teams in and of themselves. While they operate autonomously, because we don't want to interfere with the various styles of investing, there's a benefit internally of sharing success stories and how things are working, how we can do better overall as a company across the firm, widely speaking, certainly, and how we get access to meetings and things like that with various high-profile companies and such. I think that's also a benefit to the company. Yeah. I'll just say, look, it's a reminder that we always talk about there's three times the money in motion across active managers than going into passive. If you're a good-performing, top-performing active manager, you're going to see flows, and they've just demonstrated that, number one. Number two, when you have moments like DeepSeek, it reminds you why diversification matters, and you're seeing more and more people on the institutional side talk about a desire to get back into more active management. And so that's important. And then just two other points. As Adam talked about the gross sales and the benefits of true scale, since the acquisition, Putnam's quarterly gross sales are up 68%. Just to emphasize that number. And then it is not just in their open and mutual funds. It's diverse across all vehicles, including their ETF has had great flows as well. Great. Thanks so much, for the color, there. And congrats on the success with Putnam. Thank you. Thank you. Our next question is from Bill Katz from TD Cowen. Please go ahead. Okay. Thank you very much. I just want to clarify the guidance on expenses. Just, Matt, if you could just reiterate the 26. What I think I heard was you'd be flat to 25 if you strip out market action, performance fees, and pre-synergies, and so that would be an incremental 2 to 250 down. A, is that correct? And then against that, what is the revenue contribution you're assuming for WAMCO? You mentioned, I think, about 6% residual exposure on the website. Are you assuming zero contribution or some component of that? Thank you. No, certainly not zero. But we're not going to also estimate where we see the 6% going. We're obviously working very hard with Western and its clients. They're working very hard with their clients on their current business, which is diversified across multiple fixed income strategies. Obviously, what we're going to do, as we've committed to do with you as a community and obviously with our investors, is to make sure we're transparent as much as we can in terms of the progress we're making. Each month, when we highlight our AUM, we will include a summary and an update on Western. So you'll be able to see what direction that 6% is going in. We've given you the effective fee rate, so you'll be able to calculate it on a month-to-month basis as we progress through the situation. You were right on the expense guidance. It is, think about the guide for 2025 being roughly flat, excluding performance fees, because we don't know where performance fees are going to be, obviously, in 2025. So normalize it for performance fees and the extra quarter of Putnam, and then minus $250 million from that, $200-$250 million from that to get to the margin expansion that we expect. Thank you. Thank you. Thanks, Bill. Next question is from Brennan Hawken from UBS. Please go ahead. Good morning. Thanks for taking my question. Matthew, I'd just like to ask about that last point you just made. The 200 to 250, is that coming out of the full year, and will that ramp through the year? Just great. Yes? Okay. And then. Yeah. So yes. So we expect by run rate, what I meant is on day one of our fiscal 2026, we expect to be in a position where we are achieving those expense reductions for the full year 2026. So by the time you get to the end of 2026, we expect expenses to be lower by that amount, $200-$250 million. And obviously, as we work through 2025, we will provide you with updates on that. That's what we expect for 2026. Okay. So the 200 to 250 is the exit rate of the fiscal year 2026, and we'll see the progress of that through the year of 2026. Yes. But by the time you get to the end of 2026, it will be $200-$250 million lower expenses versus 2025. On a run rate basis. That's the way you should look at it. Yes. Got it. Okay. So then just two more related sort of to clarify. If you could, please. Maybe I know you said flat for the full year, but if you could maybe clarify starting point and what number we should be thinking about? And then it's my sense that this feels rather large, especially vis-à-vis Western, so is this these efficiency efforts, do they transcend the whole organization, or are they focused in any particular areas? So on that front, then I'll give I think you're asking for quarterly guidance. I'll give you that too in a second, because I want to make sure that you have the updates for the quarter. It transcends more than just Western. We're taking this as an opportunity to review the overall company. We were frankly already doing that, as we've announced and as you're used to us doing each year. For example, in the last 12 months, we've added almost 1,000 people to Franklin, and because obviously through a major acquisition, and we've also invested heavily in new sales efforts across, we now have 90 people in alternative asset management, wealth management channel coverage, for example. We have dozens of new salespeople in ETS, specialized sales force. We've added significant resources across our distribution, which is why I think you're seeing the increase in sales across the organization. While we've done that, the reason why our expenses have remained under control or remained relatively flat is because we're taking expenses out on a continuous effort to manage our margin as best we can. Now, sometimes you're going to go through some quarters where it's a bit lower, and then we expect it to go higher, which is why we provided the five-year look, because that's where we see things going when we're out five years. But I think we haven't witnessed in this industry as much strategic dialogue and change going on within just asset management in years. And we're right at the forefront of that. We're doing our very best to invest heavily in the business while retaining the best margin we can get. So I'd say in terms of the $250 million, I agree with you. It's a large number and a lot of effort, but it is across an expense space of $4.7 billion or so. So that's in $5 billion if you include all the performance fees and such. It's a meaningful reduction, but you've got to look at it across the overall firm. In terms of the quarterly guidance, we expect our effective fee rate to be in the mid- to high 37s. The reason for that is that we expect inflows into higher fee strategies to offset lower fee outflows that we expect. We expect an uptick from the low 37s to the mid-high 37s. Compensation and benefits, we expect to be $815-$820 million for the quarter. That assumes $50 million in performance fees and about a $10 million catch-up on base salaries and 401(k)s, because we do that back to January in terms of the inflationary-driven compensation increases. Information systems and technology, we expect that to remain at $150 million. That's notwithstanding the announcements we've made around Aladdin, which is all going on track. Occupancy, we expect to be between $70-$75 million, probably on the lower end of that. We're starting to see a reduction in the double rent that we've talked about. Most of the firm in New York has now moved into our new offices within New York City, which is the whole unification project that we talked to you about. And we've been paying double rent for a period of time, and that's starting to drop off. It'll fully drop off in later years, but most of it will be gone by the time you get to 2026. G&A will be a bit higher. It'll be around $190 million, and that's due to the fact we're investing more in advertising, and we've got higher legal expenses associated mostly with the Western matter. And then from a tax perspective, we expect to be between 25% and 27% for the year. Okay. Thanks for that clarity. Thank you, Brennan. Our next question is from Ben Budish from Barclays. Please go ahead. Hi. Good morning. Thank you for taking the question. Maybe moving over to the alternative side. During the prepared remarks, Jenny, you talked about wealth fundraising growing to 20%-30% of total capital raises. Just curious, how do you see that unfolding? What's the sort of cadence? It sounds like you've obviously talked about investing a lot in distribution. There are new products in the market. Is this predicated on more sort of semi-liquid democratized vehicles or retail participation in drawdown funds? So just curious if you could provide some more color on those expectations. Thank you. Sure. I'll start, and then Adam, feel free to add in. Remember when Lexington raised Fund 10, which they closed at, I think, $22.7 billion. 20% of it came from the wealth channel. We demonstrated the ability to actually, even on the traditional types of vehicles, to actually be pretty successful in the wealth channel. Again, that was years of working to build out and learning. I think the good news is our DNA actually is in the wealth channel, and so learning actually how to then bring alternatives to that. Today, we have 90 people who are just dedicated to alternatives in wealth kind of across the globe to support all our distribution teams. Then most recently, I think I mentioned in the opening remarks the three we call them cornerstone perpetual products. And so we have three perpetual products that cover real estate debt, secondaries, and just real estate equity that are almost $1 billion. In January, we had a period of time of kind of fundraising, but I'm not sure the fund's closed, but sort of had our first we raised funds with a couple of partners and had a secondary perpetual fund. So we first launched it. We had to cap it at $900 million. It actually could have been bigger because the difference between the institutional channel and the wealth channel is the institutional channel, you can call capital as you need it, and the wealth channel, people make investments. And we were concerned about cash drag. We wanted to be respectful of the pace in which we could do the secondary deals. And so that fund will continue to fundraise this quarter. In January, it raised $900 million. That was actually accumulation of a couple of months, but $900 million. This quarter, it will continue to open up and raise. Now, we have also launched that on the international side. It would not surprise us if on the international side, the first raise is similar to what we are able to do in the U.S. It just shows that, one, that when you bring the right products to the market in the wealth channel, there is a tremendous amount of interest there. Then, two, you have the skills around experts that can support your distribution teams, thought leadership, our Franklin Templeton Academy, which educates advisors on how to think about alternatives in their portfolios. Then I think much further off, but I think it is a very real opportunity, is in the retirement channel. We have launched a couple of products there, one of which we're doing with Apollo that has both real estate and some private credit in it. We have some of our own CITs. The reality is the retirement channel is going to be slow to have penetration. It's actually the best place because you get natural cash flows in. So it deals with some of the illiquid nature of these vehicles. But because it's an incredibly litigious space, because it's so focused on fees, and I always say the top-performing alts managers aren't on sale, and you don't want to put the lower-performing ones in because you'd be better off in the liquid markets than a poor-performing alts manager, and then finally, the infrastructure of the retirement platforms actually aren't fully ready to deal with the nature of this. But it's a massive opportunity that we see that will, over time, open up because I think there's a real desire to be able to bring this through to the retirement channel. Adam, you want to add anything to that? Sure. I would add a few things. To your point about drawdowns versus perpetual, we think they both play a place in the wealth management channel, and there's a difference between a regional broker-dealer and a large global private bank. So we'll see different products play different roles. But the fact is, as Jenny said, we now have three scaled perpetual vehicles that are each roughly about $1 billion in the private debt space, in the real estate, and in the secondary space. That allows us to constantly be in market talking to our partners. That puts us in a very different position and allows us to be more effective when we do come to market with the drawdown fund, and as she said, we're doing that not just in the U.S., but in India, in the Middle East, in Asia, and seeing success around the world. We've also invested significantly not only in the 90 people in that team that's focused on selling, but also in our educational resources, and we find that the more time we spend educating people on the benefits of alternatives, the better off we are. We also think that as we grow in alternatives, we want to make sure that we can service that business well, so again, one of the things we've been doing is cutting expenses where we can. We've reinvested in building out an investor services team so that we can make sure that we really service all the business as it's coming in. We're finally, I would say, working better with major distributors to co-develop products. So instead of launching a product on our own, we're bringing it with a major partner at scale at the right time on their calendar, and we're planning those launches a year in advance. And that's helped us tremendously as well. And you didn't ask the question, but I'll throw in just we're reiterating. We had given guidance last quarter, that we thought we'd raise $13-$20 billion in alternatives this year and that the higher end was dependent on Lexington's Fund 11 basically having its first close in September. So just to give an update on that, Lexington Fund 10 has committed 75% of their funds, and that's usually kind of a trigger is when you start thinking about the next fund. They would anticipate a first close sometime in the fall. Again, if it happens in September, it happens in this year. If it happens October or November, it falls into next year. And so that's where it's dependent kind of on whether we hit that higher range of $20 billion. This quarter, we raised $6 billion in alternatives. Of that $6 billion, $4.3 billion was in private markets. So that's the part that is counted towards the $13-$20 billion range. And again, that does not include that $900 million that was raised in Lexington because that will be counted this quarter, $900 million in their perpetual. All right. Appreciate all the responses. Thank you very much. Our next question is from Patrick Davitt from Autonomous Research. Please go ahead. Hey. Good morning, everyone. If I remember correctly, I don't think you include VA WINs, insurance VA WINs in your unfunded balance. And there were a few very large reported VA WINs that I think funded in the quarter. Could you give us an idea of how much that added to the quarterly flows? And secondly, if there's still more to come from those WINs and then higher level, it seems that most of the large active managers in our coverage have been losing large VA mandates. So maybe give some high-level thoughts on why you think Franklin is bucking that trend. Thank you. Well, I think he's probably go ahead, Adam. Sorry. Go ahead. I was going to say, in general, one of the things we're trying to do is to become a more important partner to fewer players, and I think that's true, Patrick, in every segment we serve, whether it's DB, DC, insurance. And a number of the wins we've had have come from significantly expanded relationships with insurance companies who have multiple managers, and they might have several dozen managers, and they want to shrink that to maybe three, four, five, or six managers. But they need to do that with a firm that can cover all of the major asset classes and support them in the field and sell. There are very few firms who can do that with the right expertise. We're one of them. So when we see that consolidation, we tend to be on the winning side of it. It was definitely true this quarter. We've got a number of similar conversations in place right now. That's very much part of our strategy is to win in those consolidation deals. I think the big one, Adam, was Venerable. I'm trying to remember, did it fund this quarter or I think it was September or October. But yes, that has funded. We continue to have more conversations with these partners. There's a couple of others that we haven't disclosed the details about potentially, as Adam said, doing more because they are trying to reduce the number of firms that they work with and requiring more of those firms. They want a breadth of capability. They want education. They want some things like our Academy become very important in this space. They like the specific expertise on insurance. We think there'll be more to come there. Okay. Thank you. Thank you. This concludes today's question-and-answer session. I'd now like to turn the call over to Jenny Johnson, Franklin's president and CEO, for final comments. Well, I just want to thank everybody for attending the call. And again, we're a people business. We're only as good as our folks at Franklin Templeton who work hard every day to serve our clients. And so I just want to thank them for all their hard work and dedication. And we look forward to speaking with all of you next quarter. This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.