Franklin Resources Wins a Positive Rating From Goldman Sachs, But with

Franklin Resources has won a thumbs up from Goldman Sachs & Co., which began covering the stock of the giant mutual fund company last week.

Goldman initiated coverage of the San Mateo, Calif., company with a "moderate outperformer" rating, citing a "quality franchise" and an "excellent management team."

Franklin manages $114 billion in assets, making it the nation's second- largest fund company and fifth-largest money manager.

Banks account for 25% of Franklin's sales - a fact that drew some concern from Goldman. Because certificates of deposits have reemerged as a popular investment, Franklin's sales through banks "have plummeted over the past 12 months," Goldman analyst Richard K. Strauss wrote.

Partly as a result, Franklin's asset-gathering growth rate is likely to slow to 2% this fiscal year, from 10% in prior years. However, Mr. Strauss added, "we view this slowdown as only temporary."

Geoffrey H. Bobroff, a Rhode Island-based mutual fund consultant, said Goldman's coverage of the fund company is "a natural extension of their involvement on the mergers and acquisition front." Goldman serves as investment banker to numerous mutual fund and money management firms.

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