Franklin Resources and rival Legg Mason are joining forces. So what does the $4.5 billion combination of two of the world’s largest asset managers mean for you?
Average investors shouldn’t expect the acquisition of Legg Mason by Franklin to fix the decadelong challenges that the industry has faced with passive investing’s rise, analysts caution.
Active asset managers have struggled in recent years as investors have shifted away from stock picking to passive investments like low-cost funds. And those hurdles will likely continue for the combined company, which will manage a combined $1.5 trillion in assets.
Active investors try to beat the market by picking winning stocks that have fallen out of favor, whereas passive funds track market barometers like the Standard & Poor’s 500 index.
“Average investors need a low-cost investment vehicle that performs well, and both of these firms have had challenges on that front,” says Cathy Seifert, equity analyst at CFRA Research. “There have been so many other changes in the asset management landscape that have impacted the average investor, but this deal is probably not one of them.”
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In November, brokerage firm Charles Schwab agreed to buy TD Ameritrade for about $26 billion. Janus Henderson and Standard Life Aberdeen were each formed following mergers in 2017.
Investors should expect more consolidation in the sector along the lines of the Franklin-Legg Mason deal, analysts say
“What remains to be seen is whether this combined firm will look to acquire a passive asset manager to better round out their asset mix,” Seifert says. “I wouldn’t rule it out.”
Legg Mason owns a portfolio of nine investment managers that do business under their own separate brands. Those include Western Asset Management, an actively managed fixed-income fund, and stock picker ClearBridge Investments. Legg Mason has a total of 164 funds in the U.S.
The deal strengthens Franklin’s presence in key geographies and creates an investment platform that’s well balanced between institutional and retail client assets under management, it said.
Contributing: The Associated Press.
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