This is Master's in Business with Barry rid Holds on Bloomberg Radio. This week on the podcast, once again, I have an extra extra special guest. Jenny Johnson is CEO of investment giant Franklin Templeton. They run about a trillion and a half dollars. She's been CEO since February twenty twenty.
She's been with the firm for decades. Just an incredible insightful conversation about how to build a company, how to grow through acquisitions, how to make sure everybody on your team understands their role is appreciated and is acting and
performing at the highest levels. I found this conversation to be absolutely not only insightful and informative, but also delightful, and I think you will also with no further ado, my conversation with Franklin Templeton's CEO, Jenny Jen Jenny Johnson, Welcome to Bloomberg.
Thank you, Berry. It's great to be here.
It's great to have you. I've been looking forward to this for a long time. I've been back and forth for a while, and then we had the pandemic hit. Let's talk a little bit about your background. You joined Franklin Templeton in nineteen eighty eight. Family members helped found the farm, have run it for a long time. And back then it was frank was a Franklin temple it.
Was, and it just we acquired tuble To nineteen ninety two. Right, So I spent a year. My father said to me, look, if you're going to be in the financial services business, you should probably work in New York. And so I spent a year working for Drexlburnham.
And that, by the way, that's tough when you're a West coast coast gal used the sunshine and nice weather.
Right, Although I was born in New Jersey, Jersey, I was born in Montclair, Okay. So, and I lived in New Jersey till I was about nine. So I came back and lived in Jersey City.
And said, now I remember why we moved to California, Right.
Hey, there's some beautiful parts of Jersey.
There are it's the weather. It's really the big Yes, Yeah, it's hard to beat that, you know, sunshine three hundred days a year, to say the least. So, since we're talking about weather. Aside from the weather, what are the cultural differences like, especially in finance, because California finance very different than New York finance culturally.
Sure, I mean I think so Franklin's headquartered in Silicon Valley. I actually think that what influences it more than anything now is the tech culture that's going on on the
West Coast. And you know, it's kind of funny if you and now you see it in New York City, but you know, if you showed up in a meeting in a coat and tie, you know, post the dot com era and kind of you know, coming into the more recent stuff, you're viewed as sort of the old economy, right, And you know, now we see everybody walk around New York City, hardly anybody where's a tie. Uh, you know, the vest.
Is the new already they may post right, it's kind of moved to Lululemon, Pansen and you know, button down shorts is about as dressed up.
So I don't think anybody expected the West Coast to lead the East Coast on uh, you know, culture and attire. But I think that's happened a little bit on the tech otherwise, you know, it the West Coast. You know, if you were in the financial services business, it was rough life you were you were in the office by a lot of people get up at nine am lunch.
Yeah, right, I used to let But the good news is you finish it one you could go out surfing.
Yeah, there you go.
Always a thing. So you're at Drexel for a year in New York, you come back to Franklin Templeton. What was your first role at ft O god or Franklin.
I was an executive administrative coordinator, right, so I was working for the COO kind of on special projects, right. And then I moved into we had a bank at the time, and I moved into running part of the bank. And I got to tell you we then spun out in auto financing business, and as a CEO today, I have to say that period of my career running the auto finance business was probably the most significant. I also ran our credit card business at the time.
Both both difficult businesses.
And learning how to do things as a CEO. One is, we were securitizing the assets and the auto loan and selling them off to other asset managers. We weren't able to buy them ourselves. And I remember being on the phone thinking, you know, as the as the pms were
asking questions about cash flows and things. So I was thinking, you're asking all the wrong questions about whether this portfolio will perform because it's things like down payment, you know, there's there's you know, the credit score, average credit card, what they risk exactly, And so it was really good to kind of learn that side of the business. And then, of course as a CEO, it doesn't matter the size
of the company. You're always talking about word allocate capital, you know, should you add more to marketing or in you know, collections, right, and those are the same problems for big companies as little companies, And so I always felt like it was great learning experience. And then the biggest thing in the credit card business in the late nineties or early nineties, those who were great at data and data analytics, uh huh dominated the industry and essentially
put others out of it. And so I became a big fan of data and how predictive it can be.
For all the obvious reasons. Right, if you have an edge in data, you have an edge across the whole business line, for sure. So Franklin obviously divests out of the banking business, the credit card business, the ODO financing business. What led to that decision? Did you guys just say we really want to be pure investment management.
Well, wet. Part of it was, I think regulatory the requirements for asset managers to have a bank were such that it was it would it would inhibit us a.
Bit post SNL crisis, Yeah, came up exactly.
Yeah, And honestly, I think we divested post financial crisis. So once the rules, yeah, so we kept it for a long time. But once the rule, search became difficult around things like seeding new funds. You had to within a year. You couldn't be more than ten percent of the fund. Well, that's hard to do in our business because people look for a track record, so you seed
and get a track record. And we just looked at it and said, you know, it's not material enough to have it, cause it the complications that it causes on our asset management.
It sounds like it was an easy decision to cut it loose.
Yeah, except that we do have fiduciary trust, which is a high net worth business.
Huh.
And it's always nice to have a lending arm when you have a high net worth business.
All right, So we're going to get into the acquisitions a little later. But from when you first started as an administrative organizational assistant. Whatever, right, right, fetch me some coffee please, that sort of And although I would imagine that you still you know, you warn't the bottom bottom of the tone and poll because people knew obviously knew who you were and knew who the family was. But from when you first started at was a let me
get my feet wet sort of roll. How has Franklin changed over the ensuing decades.
Well, I have to say, when you say you know, you're right, you know, in a business where founders are still involved in your family member, you're gonna be treated a little differently. But my father always was adamant you have to work harder than everybody else because people would look at how hard you work and work just a little less, like they won't feel like they have to
do more. And I remember my first job was a summer job and I took over from my older sister who was twenty one at the time, and I was, I don't know, fifteen or sixteen, and he was paying her five dollars an hour and he was paying me two dollars and fifty cents an hour. And I said to him, look, I think I'm I think I'm a harder worker, and I think I should get five dollars an hour, and he said, well, you can always get a job somewhere else. So that's what I learned. Okay, there's certain Dad.
Was no nonsense, no noice. Serious here hit the bricks exactly. That's really interesting. But by the way, that's really astute observation. People are gonna look at how hard you're gonna you're working, and they think I could work a little less hard. See, I would think they would want to work a little harder than you, just so no one accuses them of slacking. But maybe it's a generational thing. Who who knows, And we're not that far. I think we're about the same age.
I was always taught, hey, find the hardest, fastest guy out there and just do a little more than him. So you don't want to be on the underside. You are be passing that. So uh so, so were you In the early days, it was mutual funds, It was SMAs.
What what were you guys? Really just mutual funds? I mean that's that was the That was the vehicle of choice. And you know it evolved over time, uh to things like SMAs and ETFs and collective investment trust. Now now you have to be able to provide all of those vehicles as outlets for your investment capabilities. And I think
a lot of that change happened. It was starting to happen, but accelerated after the Global Financial crisis, where regulators pushed for more transparency in distribution fees, and so you saw this shift from kind of fees embedded in say the mutual fund vehicle, to being external on the client statement. And so then advisors wanted things like ETFs and SMAs and other things because a client was seeing that they were paying their advisor every month, and so that's changed.
I think that's been a dramatic change in the industry on the type of vehicle we use.
I always thought that the marketplace would fix that on its own, and I've been wrong about this for decades. I always assumed people would see, oh, five percent front load on a C share or a two and a half percent annual. I assume people would see that and steer away. But it doesn't appear that that really happened until the Financial crisis. That seems to be where indexing really took off and where people became a lot more price sensing.
Well, I think you were seeing a big shift to C shares where you know, you had a bigger back end trail and a smaller upfront, So that was happening a bit. And you know, look, I'm a big believer that some of those type commission products are still important.
We look in the UK where they have something called RDR, so they don't permit any kind of commission based selling, and so it's all gone to fee based and you have a huge percentage of population or orphan from advice because essentially an advisor says, ah, that's too small of account, it's not worth my time, whereas if they got that upfront commission, they'd spend the time doing it. And the
key is the difference for people investing early. So if you invest for ten years from age twenty five to thirty five, say five thousand dollars a year, or you wait till thirty five and invest for thirty years at five thousand dollars a year, you will have more money if you start for those investments over those ten year
period because of the compounding. And so getting people to invest early is really really important and you don't want to have mechanisms regulatory environments that kind of prohibit them getting advice early.
Huh. That's interesting. Although in today's digital world, as you guys know, there's so many ways to invest with no minimum fees, and a lot of people, especially of the younger generation, are very comfortable as di wires not do it yourselfers. Not that robinhood is how they should be necessarily investing, but hey, it gets some interested in finance. It gets them thinking about money. That's not a terrible thing.
No, it's not a terrible it's actually great. And especially because you can do some basic kind of asset allocation models that the roboadvisor can be terrific for somebody who doesn't have a complicated financial situation. What you tend to see is people earn more and have more and more savings. Somebody said to me anecdotally, if you have you know, sort of three years worth of savings if your income, that's when you start to look for advice because you realize,
you know what, this is more complicated. I'd rather have somebody who's full time focused on this than me as a part time person managing my money.
I just have to share a funny story. We just got back from vacation, not like terribly long, but eight or nine days, and you come back to all this mail and it's, oh, here's the irs state the pass through. I got to forward that to the accountant. Oh and here's a disclosure about this fun we have. And then here's the quarterly thing coming up. And all of a sudden, like in a rush, I figured out, Oh, this is why people pay a fee for someone to give them advice.
I don't want to deal with. I'm like relaxed, I'm back from vacation. The last thing I want to do is start thinking about New York State, pe Tech passed through. Just take this off. What is it going to cost? Great? Get this off my plate. I don't want to deal with that.
Well, and I think a lot of people when like TurboTax came out, they said, oh, it's going to be the end of the CPA. Who are the number one users of turbotaxes CPAPA? Yeah, Because in the end people sit there and say, wait a second, Actually, the more money people have, the more they have options to do other things, and they think the opportunity cost of spending their time trying to manage those things is not worth it.
It's the time. It's it's the time is crucial. Plus the rules change every year and wants to have to stay current with that. I find it's just like, you know what, and it's funny. This is like a later in life realization when you're young and have all the time in the world and not a lot of money, I could figure this out. I have to do my own taxes. And then when you're old, it's like, whatever it costs, just do it. Get this, get this junk away from me. So so let's talk a little bit
about the history of acquisitions at Franklin Templeton. Just about thirty years ago, Franklin acquired Templeton, Galbrith and Hansburger. That new name of the company became Franklin Templeton. So it was Franklin along with mutual fund pioneer Sir John Templeton. You were kind of young in the farm in ninety two when this took place. What do you recall from that fairly substantial back then, a billion dollar acquisition was not nothing.
Yeah, no, it was huge, and uh it was interesting because a lot of people, uh we we sort of came into that late as far as one of the potential acquirers. So, you know, we basically viewed it as Franklin had was very strong and fixed income, domestic equity, and what Templeton did was open up this international investing, which was really pretty new. So yeah, they were they were you know, you you there were pioneers in emerging markets and and uh and really kind of global equity.
And when we acquired it, a lot of people were skeptical because asset management acquisitions don't always work right and expected big cultural difference, and it was expensive. And I have to say that my dad understood and we It's been our philosophy, you know, throughout all our acquisitions in the asset management business, what are you buying. You're buying people their investment capability and their investment process, So don't
destroy value by going in and messing with it. So we really left it standalone on the investment side and then integrated the rest of the firm and that worked out really well.
That's so different of an approach than we typically hear, which is, we want to buy a company for the assets, the revenue stream, maybe some technology or intellectual property, and we're going to just mash you into our culture whether you like it or not, that seems like a little more nuanced approach that your dad took. I don't see a lot of other mergers in the finance space that
are that hands off. Maybe the big acquisition of Pimco twenty years ago was maybe a little too much hands off, But for the most part, it seems like everybody just mashes everybody together.
Yeah, I mean, I you know, in our case, I wouldn't say it's totally hands off. It's hands off on the investment process, uh huh, right, and really trying to integate and integrate the rest of it, and then trying to figure out ways that you can add value because you have scale so that these firms you know, don't have. That was less of an issue in the Templeton deal, but with our more recent acquisitions that's been really important.
What can we do because we're bigger, that can enhance the various investment teams.
So let's talk about some of those more recent acquisitions. Twenty twenty, you buy leg Mason. I think it was an old cash deal four and a half billion dollars is that around, right, And then we took on some debt. Yeah, what was the thinking that what did leg Mason bring that you guys needed or didn't have.
Yeah, So in the case of LEG, they had Western Asset Management, which is you know, core coreplus fixed income, which is the largest category. We just didn't have scale there, and you have to have scale to be in the institutional space. And the other big one that was exciting for us was Clarion Partners, which now is an eighty two billion dollar I think they were probably forty five
at the time, forty five billion real estate manager. And we knew that we wanted to get into alternative space and so getting that as part of the LEG deal was really exciting. And then you know unbelievable managers and Clearbridge and Martin Curry and brandy Wine, and so we just got great expertise there. They were seventy five percent institutional,
we were seventy five percent retail. So bringing the two firms together, you really made us fifty to fifty retail and institutional, and that's been very important.
Huh. And then this year you acquire Putnam for almost a billion dollars. Puttenham almost the purchaser of Templeton, which is kind of kind of amusing that everybody ended up in the same place. That seems to be a very strategic purchase. Tell us the thing behind acquiring Putnam, So let me step back and just say sort of what our strategy is in acquisition.
So we've done I think ten in the last Putnam will be R tenth in the last three years, and they've all been focused on. If you think about the big macro trends going on in the industry, one is private markets are here to stay, and they're here to stay. One take private credit. Right the banking crisis of the Global financial crisis, had regulators changed capital requirements for banks.
Banks preserve their capital for the best clients, and it created this opportunity for you know, basically private credit outside the banking system. And honestly, with the discussion around which I have strong opinions on discussion around more capital requirements post the regional banking crisis, I think that's only gonna get worse and then you'll, well, that's going to.
Create opportunities for firms that are filling that void exactly. And by the way, this really began in the late nineties early two thousands as the big banks moved upscale. They like to void underneath and private markets stepped right in.
That's exactly right. And then the other piece of that, and you know this was definitely fueled by low interest rates, but private equity. The fact is companies can stay private longer. And you see that in the numbers. Right, two thousand, average company went public after three years. That was probably an anomaly in the dot com right. By twenty nineteen it was I think nine to ten years, and by twenty twenty two was fourteen to fifteen years before they
were going public. Right, you have half the number of public companies that you had in two thousand and so you look at it, well, why go public?
Right?
A public company has quarterly earning pressure. You know, there's a lot of scrutiny around compensation of the staff, there's a lot of uh, there's an expectation on political you know, you're going to opine on certain political issues. If you're private company, you don't have any of those pressures. Right, And in a time of great technological advances, you need
to invest for things. I mean, some of the stuff we're doing in the block change space won't be material to the firm for seven to ten years, but we think is really important that we're doing it now.
But if you're a private comp if you're a public company, shareholders are going to give you grief about that sort.
Of if it's impacting your quarterly earnings. We're fortunate in that we still have founders and employees and management that have a significant amount of the stocks, so we can sort of withstand some of that pressure. But if your stock's under performing, you can always get an activist in who's looking short term to capture the benefit and say we'll be worth more if we break all this up.
That doesn't build a long term sustainable company. But that's the type of pressure that public companies have, and so we believe that trend is here to stay, and we knew that we needed to add those capabilities. Soe I say, there's three areas that we look for an acquisition. So one is filling product gaps, particularly in the case of
private markets. The second is the second big trend was when the financial crisis happened and you had we mentioned, you know, the regulators made put pressure onto have transparency around distribution fees and advisors became fee based that honestly pushed much of the power to the distributor, and honestly actually to the person who deals directly with a client, to the financial advisor themselves and so, and the manufacturer had less power, and so we look for ways that
we can build greater strength in distribution as being a better strategic partner. Some of that's fintech. In the case of the Putnam it's building a closer relationship with Power Corp. Who has you know, who owns both Great West Life Insurance or significant control of it, as well as Empower the second fast the second largest retirement platform, fastest growing one. And that's really important because the retirement channel is where mutual funds still have growth, right.
Because there's no reason to put an ETF there Exactly the negative on a mutual funds phantom taxes. Hey, if it's a qualified account, it doesn't matter. It's it's irrelevant. And there are advantages to mutual funds in terms of trading and management that give it a leg up over over ETFs, especially in that sort of environment.
Absolutely, so, I want.
To talk about the forty percent and a little bit of insulation from public markets, but I'm going to circle back to that. I got to ask you about one last acquisition last year. You purchased O'Shaughnessey Investments, including their direct indexing product called Canvas Full Disclosure, where one of the early users of Canvas. I think my firm, Adults Wealth Management is the largest, or at least was when
you acquired it, the largest client of Canvas. We love the product and our clients have found it to be tremendously useful in terms of managing and offsetting capital gain taxes. What was the thinking behind the O'Shaughnessy acquisition and what are the plans for Canvas fantastic?
I mean you probably could having being a user of it, you probably could even speak this more than I can, but I can tell you we think again, a big trend is this direct indexing. But the reason we love Canvas, and I know you know this is Canvas grew out of a quant shop that built the technology to manage
their quant portfolio. And so when initially you just have direct indexing with tax optimization, but we look at it as a tool where we think you can take just like the trend towards SMA separately managed accounts, you can use the technology of Canvas express our active management strategies in there. So take a mutual fund strategy, deliver it through the Canvas platform overlay with tax optimization, and even
include some ESG overlay. So if you have a client who says, you know, I really want to you know, my daughter will say, I really want things that are pushing towards net neutral, on net zero and carbon, so she wants her portfolio manager. That way, you can put those tags in there but still take a professionally managed strategy and express it through that technology. So we looked at that and said, this is going to be really
significant in the future. We have to be in the direct index space, but more importantly, we have to have great technology because we think this is just the beginning of a trend. Right.
Not only is the software really good, but the O'Shaughnessy database so that they've been polishing up for decades. Very few things, I mean, Crisper is probably the only other one that is that focus, that dedicated that clean. Most databases are just problematic to do the solo work. And Jim is now retired, but and a son, Patrick took over. But it's a great product. They're a great team. I'm sure you guys are gonna have a lot of success with them. Let me go over a couple of more
acquisitions that really kind of surprise me. Managed options capabilities tell us, tell us about that.
Well, we think that's going to be important to add to the Canvas platform. Well really so, yeah, so managed options are important part as part of the tax optimization strategy. Uh. And so the feeling is that you needed that to be included to where this where the technology WI ultimately go for this where the uh the strategies ultimately.
So when I hear managed options and capital gains, I think zero cost collars and things like that, is that what's along the lines?
Heah, yeah, so they can include that now in in like a separately managed account.
Oh, that's really really interesting. And then Alcentra you acquired from bny Mellon Lexington Partners, who's another private equity and secondary entity. And then I didn't realize you guys bought Advisor Engine that was like a big sort of semi robo advisor, uh for for advisors. I mean this is a long line. And then Alternative Credit Manager, Benefit Street Partners, and then Athena Capital. I mean, you guys have been
on a tear. All of these things are different products filling in holes, different services, and you want to be able to offer a full rounded set of products to institutional and retail clients.
We want to be the first phone call. We want to be the strategic partner where you know, somebody's thinking, I've got this problem, let me think about how to solve it. I want to talk to Franklin Templeton and talk to them about how to approach it. And so you take Advisor Engine. It has a CRM system that was built by a financial advisor. So you know, a lot of you know, a lot of smaller rias don't have a tech team to sit there and say how do I use Salesforce? How do I use Microsoft Dynamic?
And so they want something simple. So this is a simple CRM system that's just for the business of being a financial advisor. And if we can build that relationship with that advisor, then we feel like we can be a stickier partner.
How important is the registered investment advisor the ri A space to Franklin Templeton, I always thought of you guys back in the day as mutual fund managers, perhaps selling into that vertical I sound like a marketing guy, But how important is the ri A space to Franklin Templeton Today, well.
The ra as have been growing again as the fee based environment and the fact that people honestly could take their book and walk in and set up their own shingle and be on a platform provider, and so it's a really important channel for us. It's it's a we are much bigger in the wirehouse and the UH in the independent channels because that's kind of been our DNA historically.
UH and and those who who were big in the ETF tended ra as have tended to lean more towards ETFs, although that's a little bit of a stereotype, and so it's been an important area of focus for us to grow that channel.
And to be fair, the wirehouses have kind of been slowly morphing into advisors. They're all hybrids these days. It's less transactional, more fee based to the benefit of the clients.
Absolutely couldn't agree more.
Huh really really quite fascinating. Let's talk a little bit about your experience as a woman running a corporation. You've held leadership roles across just about every line of business in the company. What was that experience like, what did you learn from running things as diverse as investment management and technology. It seems like totally opposite business.
It's funny, So you know, on the first question, people ask me, what's it like to be a woman in finance? Well, the problem is I don't know what it's like not to be one, So I don't know that I have a good answer to that, but I can say I am so thankful today as a CEO to have having run technology because so much I think of decisions that we have to make in innovation that's happening requires a
basic understand of technology. And so I look at you know, parts of your career you've sort of moved your way around, and you wonder whether it's going to be relevant at some point or not. And some of the things that I think we would naturally people think wouldn't be relevant to being CEO have been the most relevant. I mentioned running the auto finance business and honestly, running the technology department.
You don't have a background in tech. How hard was it to ramp up running a tech division when you're not a natural geek And it's almost a different language sometimes.
So it's funny. I am divorced now, but I was married to a guy who was a tech person, and I'd always ask them all these questions. I was really curious around it, and so I always felt like he gave me a really good background in understanding technology. And then I learned to be fearless in asking the question right. Tech people are used to everybody's being so afraid of tech that they give you They can sometimes give you a a little bit of a blurred answer steam yeah,
and you're afraid to look stupid, so you don't ask. Well, I learned, you know what, if you think about what technology is, it's moving this piece of data from here to here and maybe adding some new data. Dumb down what you're talking about, and let me just try to understand it right, and and things like cloud servicing right. These are concepts that have existed in tech for a long time. The technology gets better and we usually change
the name about every decade. But once you understand what it's trying to achieve, you don't have to be a programmer. You just you know. And I honestly, I think one of the biggest things that people don't appreciate is the quality of data, truly, garbage in, garbage out, and so having discipline around your data management is really really important in a tech department.
It's really hard. Also, we were talking earlier about the O'Shaughnessy database. I know that they painstakingly triple check and quadruple check stuff because you don't want an errant thing in there that will change the outcome of a backtest or a model.
For sure. And I think actually we all talk about AI and AI understanding and the models that you use, and the combination of models is going to be really important. But honestly, I think the real competitive advantage is going to be and this is why I think scale in asset management is so important, is the breadth and depth of the database. So we have an investment data like that is shared by our eighteen individual investment teams and
so you know as they contribute. So maybe a team like our Global Macro team has fourteen different feeds for its ESG framework. They come in it's scrubs centrally. Now that data is available to the other teams, right, and we think over time it's going to be more about what unique data do you have that you can apply your models. It's going to be more and more important.
So let's talk a little bit about your leadership experience. Your timing was impeccable. You step into the CEO role February twenty twenty, Thank goodness, nothing was about to happen over the next three years. What was it like, a month into the new gig and suddenly the world shuts down.
Yeah, well, so I stepped in I think February eleventh, I think February twentieth, we announced the acquisition of leg Mason, which of course had been in the works right for quite a while. So we had good plans in place, and then about three weeks later, remember we were going to flatten the curve with two weeks off.
Yeah, that's it turned into two years. It's yeah, that was transitory.
Yeah, that was transitory. You know, you just deal with the cards that are in front of you. And the good news was when I was running technology, I became very passionate because we had you know, developers in India, uh and kind of around the world, Poland, in various places, and I felt like it was really important that you could see people when English was a second language, and so we push, I pushed the tech team to get
a desktop video and so we had these devices. They were called a Tanberg device and it's sat separately on your desktop, and we would do video calls and so the company had you been doing this for twenty years Zoom before Zoom, Yeah, exactly, and so we were comfortable. It was already part of our DNA to have meetings where inevitably somebody was on video. So it was already kind of how we operated. Now you had everybody on video, and I think the thing that I appreciated was actually
people's finally believed you can run businesses that way. And so, you know, in many ways, we closed the leg Mason deal two months early, and I think it was because we were in some ways more efficient by doing it via video, not everybody getting on an airplane and going and trying to work your calendars to go meet you know.
The crazy unexpected benefit of the new post nine to eleven rules was that everybody had to have backup systems. You couldn't just have everything in one location. I think the SEC promulgated those, and when people were suddenly forced to work from home, it was very easy to get or relatively easy to get up and running. Just an unexpected side effect of the new regulations that came in after you know, we lost the twin towers. It's who knew that the SEC can actually be so forward looking
And hey, you know, it all worked out. We were all able to know for sure to get up and running. So were there any complications from all this remote work in your CEO transition or you were in place when everything hit the fan and you know, it was just a matter of tacking into the wind when the world changed.
I mean, I wouldn't attribute anything in particular to that. I mean, you're you know, when you do an acquisition, one of the most important things you do is assess talent, and there's a bias towards your own talent, and it's a missed opportunity if you don't infuse your organization with talent from the company you acquired. And so we were very focused on that. And sure, you'd love to meet people in person versus doing zoom in or views, but
you know, we had to do it that way. We ended up with I think two thirds of leg Mason's kind of corporate services groups came into Franklin Templeton and a big part of the distribution team became part of Franklin Tumbleton. So you know, you're trying to kind of build a best athlete, and it's not just the best athlete, it's the best team. So sometimes you're just trying to make sure the team will you know, coalesce. And I think we did a pretty good job of that.
Really interesting you mentioned your dad. Let's talk about some leadership lessons. What did your father teach you about managing people, running a company and getting all of the horses pulling the cart in the same direction.
I mean, one of the things my father has always said, take care of the client and the business takes care of itself. And so anytime there'd be and I still talk to them about things. You know, how old now he just turned ninety in January.
And sharp as attack. Absolutely, that's really you got some good genes.
Yeah, you amazing And so you know, if you think about that and you overlay that in any decision, is this good for the client? Then I think that gives you a lot of clarity. It's kind of a north star there. And then I'd say, my dad is you know, he's always incredibly fair to people, and you recognize that every person contributes to who we are as a company. When your call center employee picks up the phone and is talking to a client. They're shouldering the entire reputation
of the firm on them with that client. And my dad always understood that, And so there's just a genuine respect for everybody's contribution to the company, and I think that's part of our culture.
That's really interesting. You mentioned you took a slot from your sister when you first started at an entry level. I know one of your brothers was very involved with with the firm. What's it like dealing with people that you have this familial personal relationship. How do you manage around that? I would think that's I'm just thinking about my own siblings, and we would have killed each other and gone bankrupt long ago.
Everybody asked me, is this succession not our family?
I wasn't even thinking about that. I'm just thinking about my own family, and I know there would have been bloodshed, But how do you navigate that challenging.
They were definitely tires where I'd say to my brother, listen, stop, you can't treat me like your little sister in I meeting but no people, right, But you know what, as a family, we get along great, and my brother and I get along great, and you know he's still executive chairman today, and you know we talk about parts of the business, things that I'm struggling with. I'll talk to him, I'll talk to my dad.
Uh.
And I got to tell you what a great privilege it is to be a CEO and have people who care so much like you do, to be able to talk to about things that you're thinking about.
You go to them for advice all the time.
We'll talk about, you know, before any acquisition is done. That's clearly you know, part of the conversation as well as my uncle. My uncle is still active in the firm, and so you know, we'll have conversations about what we think, does it make sense? And you know, it's just my father, my uncle, my brother will never say you have to do this. They'll say, here the thinking on it. And my brother would say the same thing when he was CEO for fifteen years. My father was a great resource,
but never would tell you what to do. And so it's nice to have those voices in the room. But in the end, the decisions mine as a CEO with my board and my management team, and they're just great advisors.
That's great. I love the stock symbol Ben right, I mean so great. You talked earlier about long termism versus short termism. The family still owns like forty percent of the outstanding shares. Yes, does that insulate you from the sort of short term activist? What about this quarter's returns when you're making those long term investments in technology, how does that affect how you navigate?
Yeah? No, I mean for sure you're The risk in asset management is that an activist comes in and says, you know what, why don't we spin off all these groups because we can get a bigger multiple for the alts business and you know, various things, and that that is a short term gain, right, and doesn't build a
long sustainable business. So it's better to have that, you know, for and I genuinely believe scale is going to be more and more important as I mentioned, for things like data for asset managers, and so building a long term business really important. An activist doesn't take on a company that's got a forty percent you know, control, because you can't get enough stock to be able to ultimately you know, right, it's.
Ninety percent of the remaining sixty it's a it's so that it does create a little bit of a buffer, so you guys can think very long term, make acquisitions and make investments which other publicly traded companies might not have that luxury.
And we're totally aligned with the shareholders because we're looking for the best outcome for the stock. And again, sometimes that's making some investments today that you know will pay off in a few years.
So this is a ridiculous question, but tell us about your next acquisition, meaning I don't expect you to say we're gonna pay X for this, Like what areas do you think are interesting? Where are you looking to say, hey, we can acquire some talent and some technology in this space.
So with respect to kind of product gaps, the only one that we really feel is out there as a gap is infrastructure. So if interesting because we think there's gonna be a lot of growth on the.
Bond side or on the equity side.
Probably equity, but because we can do on the private credit teams, they can do it on the on the bond side, but it would be that would be an area that would be interesting to us. We like local asset management, so you know we have clients one hundred and fifty five countries. People tend to like home, they have a home country bias. So you know eighty percent
flows in India tend to go to domestic products. We were the first foreign manager in India and so we have local equity, local fixed income, but we look for markets that made sense to us. We'd be a buyer of a local asset management. We have them spattered throughout the world. And then, as I mentioned on the distribution side, anything that builds that deeper relationship that can help us with distribution.
So I don't want to talk about politics. I want to talk about culture and environment. We're recording this. We
have President Modi here in the US. India seems to be like a perennial next economic powerhouse after China, and it just always seems to be not catching that next bid when you look at a region like that, And I don't want to just talk about India, but if you're looking at India, or you're looking at China, or you're looking at Taiwan or Singapore or Korea or Vietnam, how do you think about building a presence in a place like that and developing a relationship, either building or
acquiring a local entity, Because how do you pick let's focus on this region over that region. It seems like it changes from week to week, month to month.
It's going to matter the demographics of a country, the growth, the policies, the regulation, all those going to the factors. I mean, we were in India in nineteen ninety five, We're in Taiwan in nineteen eighty five, China first investments in nineteen eighty eight. So you know, we look at those Asia is going to be. They say there's gonna be a billion people who enter the middle class in the next decade, and eighty seven percent of them we're
going to be in Asia. I lived in India for a little while when I was running the Technology and the Operations group, and I can tell you fifty six percent of the population is under the age of twenty five. It's got a British legal system, a British education system. You know, while there's twenty three different languages that are spoken, and more dialogical English. You know that certainly you aspire to speak English, and so the people that you hire
from colleges are all English speaking. So that's those are all great tailwinds for the economy. Many people say, you know, India grows at night when the government sleeps. I think Mony's been doing a really terrific job at you know, trying to to you know, reduce the amount of kind of bureaucracy that's there. I have to say that my observation when I would be excited by all those statistics
was Indians were the most skeptical about India. On my last trip, it was a clear difference in view that that in India, India and Indian Americans are really excited about what's going on. And for the first time I found an optimism there that I hadn't really sensed before.
That's so interesting because that's what I meant by they're perennially about to happen, Like they could very easily be on par with China in terms of their economic prowess. More along the lines on technology and software and other areas where clearly there's a huge, huge infrastructure there and it just seems to like always be about to happen. It never happens.
Well, you know, they say there's six times the number of engineers that graduate in India every year than the US. And I can tell you, you know, an Indian would prefer to go to an I than Harvard. They look at Harvard as a safety school. I mean really and some I t though is really still very difficult, right, but the its are pretty phenomenal, and.
We end up, you know, importing a decent number of engineers from the best Indian schools. Is that still going on the way it used to?
Well, I think a lot of them are deciding that there's more opportunity even at home. It used to be they had to come to the US or Europe because that was going to be where the opportunity is. But now the domestic economy is growing so well that there's a lot of excitement, so there's lesson choosing to leave. And then I think, you know, China, A lot a
lot of discussion around China. You know, China's what's the US twenty three percent of world's GDP in China's eighteen percent, the next the third is like Japan at four point nine. I mean, it's a big, big market and it's going to be important, and so you know, we have a joint venture there and we continue to you know, invest in China. But then there's other markets you know that you look at There're three hundred million people in Indonesia.
They get their policies, right, it's going to be amazing growth. Vietnam, you know another one. Capital markets are really tough there, but you know it should be a great opportunity and growth. And you see some of the supply chains. People are diversifying. India as one of the beneficiaries of that. Vietnam's another beneficiary of that. Japan even in the case of semiconductors. So I think there's just a lot going on there
that is pretty interesting. And then the Middle East is another amazing U.
Yeah, they seem to be purposefully trying to morph their reliance away from crude oil and energy towards more modern technologies. How can you even think about making an investment in the Middle East on anything other than oil. That's no longer the case.
Right, I mean, I think what's interesting is they think like a generational family thinks, right, and so in their mind, oil runs out, I don't get three generations for it.
Whatever it is. They want to reinvest in their economies to diversify it, to ensure that they're not out of money when that happens, right, And I actually genuinely believe some of the greatest innovation on renewable energy is going to come out of places like Abu Dhabi and Saudi Arabia because they are investing in it and they have the balance sheet to be able to make those investments.
And keep in mind, oil isn't going to go away. It's just gonna go away as an energy source. As a material science source, it's enormous. The old joke used to be the Arab cheeks says to the American businessman, we're selling you all this oil. We can't believe you guys. Burn this. You know what it's really good for. You can make it into a million different things. And that's the future of oil, not not energy, but materials. So you have confidence in in what's going to take place
in the Middle East. How does one invest into that region? If you're a retail investor, Hey, I like the idea of India, I could go buy an ETF. I like the idea of Middle East. How do I invest in that?
Well? I think you got to spend a little time there and go see because I took my executive committee to the Middle East and we have visited several countries there, and honestly, I think that many of them felt that we were going there to you know, think about raising money from that region and came away thinking they're going
to be investment opportunities there. We actually acquired in two thousand and seven a local asset management I mentioned local asset management being important, So a local asset management team that's based We've been in Dubai about twenty years and we're the largest I think, you know, multinational Sharia manager for Islamic finance.
Huh.
They came out of that local team and so they do local GCC bonds and equity investments. So there's a lot opportunity I think to invest there.
Huh. Really quite fascinating. So let's talk a little bit about what's going on in the world today. We've seen this massive change in rate regimes. How does that affect your ability to run the firm and how does it affect fund managers dealing with this sun in five hundred bases point increase in rates.
Well, I think the good news is that fixed income is now actually an asset class you want to be in. And you yelled exactly, and so you know, I think that's that's terrific, right, And then you know the other thing is volatility is good for active managers, right, It shows whether you have skill. And we've we've come off a decade where basically government's been pumping money into the system. If you didn't have access to private markets, you couldn't
make any money in fixed income. So where'd you go? You went into equities. It just exploded equities up and.
Was twenty fourteen fifteen percent years exactly. That's that's double normal.
But it was hard if you're if you are an active manager, your job is to have a diversified portfolio and think about risk adjusted returns. And when you have a momentum market like that and you have five companies that take you know, twenty five percent of the index or whatever it ended up, being a professional manager gets nervous by that type of concentration, and say the S and P five hundred, and there's not enough discussion about
how the indexes. The market risk of the index changes depending on one you know, the day Tesla was added to the S and P five hundred, it became a much riskier investment by investing in the S and P five hundred based on volatility and concentration. And so in those types of market it's hard for an active manager to actually beat that but when you have volatility, that's when you start to see outperformance.
Huh. So let's talk about money market funds. Not only are you seeing some yield on fixed income products, money market funds used to yield nothing. Now you're actually seeing some returns. Even though there's been some concerns about some of the regulation around money market funds and the problem we had in the financial crisis. What is Franklin Templeton doing in this space?
Well, first of all, I don't think money market funds look anything like they did when you had problems and you just had a couple of huge difference and so you know, there's if you have a certain amount of risk and you're a prime floating fund. Otherwise you're you're you know, tied to the dollar and it's it's short duration, and uh, you know, I think very secure. And you know today you can get five and a half percent
in a money market fund. I mean that's pretty aggressive, right really, And I think that we've seen a lot of money flow into money market funds because people saw that they could get that and they weren't ready to get back into the market. Now, having said that, we're close to the end of the cycle. Uh, you know the rate hike se right, Okay, you know, I think the FED is saying they're going to still raise more, and I think you could see one to two more
times that they raise this year. I think I think people are finally over the they're going to cut this year. I definitely don't think they're going to cut this year.
Those were the same people, by the way, who have been forecasting recession for the past eighteen months. Yeah, so of course they think the FED is going to cut. What I find fascinating about the whole FED investor community thing is that Jay Pal keeps saying this is what I'm going to do, and nobody pretty right. I mean, go back twenty years, you had no idea what the FED was doing. He's telling you. Nobody wants to believe.
You know why. A huge percentage of fixed income managers have only lived through the time that the FED bailed us out every time, right right, And so they've been in that and so they believe that that's going to
be the response. Whereas people that have a little more experience like me, you right, we know that you can't always, you know, count on the FED to bail you out as as a matter of fact, Jay Pal's trying to be very clear with it, and the market keeps fighting the FED and thinking, you know, they're going to call
his bluff or something. I think that the FED is being very data driven at this point and uh, and he's trying to make it clear that if they're the economy still remains pretty hot, he's going to raise rates.
Here's a crazy stat that someone shared with me. If you were born after nineteen eighty and you work in finance, you don't know what it was like when we had no idea what the FED. I remember we used to look at the Flow of Funds report to try and tease out what might happen. Now the FED says we're going to do this, and then they go out and do it. I'm born before nineteen eighty, so this is all new to me. But imagine spending your whole career where, of course we're gonna get bailed out by the FED.
If that happens, how do you recover from that as a professional. If you've never experienced wild market I guess that isn't true, because you have experienced wildmarket volatility. Just the cavalry has always come to the rescue.
That's right. I think that's right. And I don't think that, you know, I don't think that the FED is going to oh I as I said, I think the FED is going to be very data driven. And right now, you know, unemployment is still what is it three point seven.
Very low, right, historically low level.
You're starting to see some labor participation coming back in a little bit. You know, look at a lot of people say is there gonna be a recession or not? There probably is. I mean they have to write, I mean that they have to cool it down. The question is is it a deep recession that causes a lot of We don't think, or at least I don't think. And by the way, we have five different fixed income teams at Franklin Templeton, so there are some different views
on this. But that we'll have a deep recession. Uh and uh. You know, but the FED is definitely jammed on the brakes and it's still been hard.
You know.
The easy part was getting inflation from nine to five four and a half. Now is the real challenge.
So less PPI that came out had a three handle on it. CPI usually follows PPI. J PAL can put a flag in the ground to clare victory. Take a long vacation. He's already won, right, Is am I oversimplifying that too much? Or can can he just say all right, I'm taking the summer off.
Well.
I think the challenge for him is that they've been very vocal about the two percent target, and which.
Is a little weird because two percent target was post nine to eleven, post financial crisis, post pandemic, where rates were at zero and two percent was the upside target. Maybe that target should be rethought. Maybe three percent makes sense.
So until we start to hear the FED start talking about maybe they're going to change that target or lighten up on that target, I think it's tough for him to just take too long of a break. Sure he can take the break through the summer.
Yeah, take this summer off, go fishing. They had a Jackson hole his great fly fishing there you go, right, I mean he could just chill out for a while, all right. So I want to throw one curve ball at you. And as a West Coast girl, I got to ask you. You're on the board for the San Francisco Giants. What was that experience like?
So I was Now my brother Greg is the control person of the Giants. It was a blast. I have to say, Uh, the thing that I learned, I think I know a little bit about baseball. I don't know anything about baseball. People talk about statisticians, they know everything. This guy's gonna move three feet with this picture, who goes up? And so pretty quickly I realized I don't actually know that much about baseball. But I loved it.
It was It was a lot of fun. And of course I was there as I tease my brother about, you know, when I was on the board, we won three World Series? Have you done?
What have you done? Right? Exactly?
He actually knows a lot about baseball, and.
That's very funny. Just goes to show you that breath of and depth knowledge doesn't necessarily help you win win.
I think the key was Jenny wasn't really involved in making too many decisions.
You are telling when to bring in the left, we need to switch pictures. That wasn't part of your responsibilities, all right, So I know I only have you for a little while. Let me jump to my favorite question that we ask all our guests, starting with tell us what you've been keeping yourself entertained with? What are you watching or listening to these days.
I just finished. I'm always way behind on these things, So I just finished. I think it's called Dead to Me, which is a hufflick seriously, which I thought was it's a it's like a dark comedy book.
Very darny.
Yeah, very good, but very good. It was funny.
Uh.
And I've been watching a little bit of Manifest, so that was one that.
I've heard about Manifest. I haven't seen it yet.
Yeah. So anyway, and then you know, I uh, I love to watch there's a there's a streaming service called Curiosity Stream. Uh huh oh sure, and you know it's got great documentaries on science and history and stuff like that. So I tend to watch some things. I was trying to understand quantum computing and what it does and quantum entanglement and because from.
A entanglement, spooky action out of and so you know, Curiosity Stream is one of my favorite has one of my favorite astronomy. It's really they do like deep crazy stuff and it's you just get.
Lost the Yeah, no exactly, So I love watching that.
Kind of thing. Huh really really interesting. Uh. I know the answer, but I got to ask anyway, tell us about your early mentors who helped shape your career.
Well, my father is, uh, my early mentor and continues to be my greatest mentor.
Uh.
I feel incredibly blessed to have them and and I'm grateful.
Uh.
And like I said, he's uh, he never tells you what to do, but he's always a great if you ask, he's he's always great at giving you, you know, his opinion. Uh and really incredibly thoughtful.
Huh. Really interesting. Let's talk about books.
I have to say something about my mom for a second. Okay, so you got to undership my mom had seven kids and then went back to Stanford medical school. So really my dad was building Franklin. She was she was doing that and they you know, she's eighty seven. They're amazing. And you know, how long was the leadership?
How long did she practice for? Oh?
I think she practiced probably you know, twenty five years.
Wow, after seven kids went to medical school, that's a hell.
I think she probably decided she needed a reason to be out of the house.
That's very funny. Let's talk about books. What are some of your favorites and what are you reading right now?
I am reading a book on Kissinger right now.
But I think you know his book or the someone else's biography.
I'm reading Walter Isaacson's book on Kissinger. I loved his book on Steve Jobs, and he's done so. I like historical fiction, and I like history books. Probably can fall it. I really enjoy his historical fiction books. She once in World War One, World War two. He's a great one called it's about the building of cathedrals, pillars of the Earth. I think it is.
Everyone of his books could absolutely be a movie, right, I mean they all are like a James Bond online. But by the way, if you liked Isaacson's biography on Jobs, I'm drawing a blank on his name is on the tip of my tongue. Did you see the book on the right Brothers? Oh, David McCullough, Oh yeah, yeah, so fascinating.
Yeah, he's another one. I'm a big fan.
Right, Everything he writes it's just amazing. Right, It's like he was there reporting on it, and one hundred years forward exactly, just so much details. Down to our final two questions, what sort of advice would you give to a recent college graduate who is interested in a career in either investment management or finance.
You know, I feel like as an industry, we don't do a good enough job at selling people and what we do. And I tell the story about I have five kids and with my daughter I I was talking to my daughters and I said, so are you going to join me in this industry? And one of my daughters said, no, Mom, I want to do something that helps people. I'm like, are you kidding me? This industry
is a great industry to help people. You know, you wouldn't have the vaccines that we had without you know, the businesses that were out there that we're investing in trying to you know, find opportunities. We help people I say it Franklin Templeton to achieve the most important financial goals of their life. And know, by the way, every goal, not every goal, most goals require some financially.
Buy a house, retirements, kids, education, down the line.
Sadly, So, I my first thing is to say, this is just a great industry to be in if you want to make a difference and you want to help people. You think about some of the stuff on esg. You know, the kind of impact investing those types of things. All of those things require money, and so uh, one is it's a great industry too is go in and be
just curious, ask questions. Read I always, you know, say to people, read the CEO's letter in an annual report if you want to know what's on your boss's mind, right, because they're going to lay it out there and try to connect what you do to the bigger picture of whatever a company.
Is really interesting. And our final question, what do you know about the world of investing today you wish you knew thirty five years or so ago when you were first starting out.
Well, I think the tenants that have always been important, which we talked about earlier, like diversification get invested early, the value of compounding dollar cost averaging where you just keep committing, you know, and investing month after month after month. Those things get lost sometimes in the stories, and yet they're probably the most important things about.
Investing, really really, really good stuff. Jenny Johnson, thank you so much for being so generous with your time. This has just been delightful. We have been speaking with Jenny Johnson. She is the CEO of Franklin Templeton. If you enjoy this conversation, well, be sure and check out any of the five hundred other such conversations we've had over the past nine years. You can find those at iTunes, Spotify, YouTube, wherever you find your favorite podcast. You can sign up
from my daily reading list at ridults dot com. Follow me on Twitter at Ridults, follow all of the Bloomberg Family of podcasts on Twitter at podcast I would be remiss if I did not thank the crack team that helps put these conversations together each week. Attika of Albron is my project manager. Justin Milner is my audio engineer. Paris Wald is my producer. Sean Russo is my researcher. I'm Barry Ridholts. You've been listening to Masters in Business on Bloomberg Radio.