NEWSMAKER

With new pres­i­dent and CEO Duane Green at the helm, Franklin Tem­ple­ton is em­bark­ing on a pe­riod of change, look­ing to di­ver­sify its prod­uct of­fer­ings greatly

Investment Executive - - FRONT PAGE - BY JADE HEMEON

Duane Green is spear­head­ing change at Franklin Tem­ple­ton.

one of the most mem­o­rable sym­bols in mu­tual fund mar­ket­ing is the moun­tain chart that tracks the as­cend­ing value of an in­vest­ment in Tem­ple­ton Growth Fund, launched in Canada in 1954 by the leg­endary Sir John Tem­ple­ton.

Al­though the fa­mous mu­tual fund’s long and steady growth record is an im­pres­sive ac­com­plish­ment, the prin­ci­pal chal­lenge that Toronto-based fund spon­sor Franklin Tem­ple­ton In­vest­ments Corp. now faces is telling the world that the gi­ant fund or­ga­ni­za­tion can con­trib­ute on many fronts to a di­ver­si­fied, multi-as­set class port­fo­lio, says Duane Green, the firm’s new pres­i­dent and CEO.

“We’re work­ing to change the per­cep­tion of who we are, to let peo­ple know we’re a lot more than a Tem­ple­ton global eq­uity, value shop,” says Green, 44, who was ap­pointed pres­i­dent and CEO in Jan­uary, re­plac­ing Don Reed, who re­tired af­ter 27 years at the firm.

Al­though tra­di­tional Tem­ple­ton-branded global eq­uity prod­ucts make up about a third of the $40 bil­lion in as­sets un­der man­age­ment (AUM) on be­half of Cana­dian in­vestors, the firm also has sig­nif­i­cant AUM in mul­ti­fund man­aged so­lu­tions. Those in­clude its Quo­ten­tial multi-fund port­fo­lios, as well as global fixed­in­come, bal­anced and yield­fo­cused prod­ucts and funds un­der the Franklin Bis­sett ban­ner. The firm also has taken the plunge into new in­vest­ment cat­e­gories: al­ter­na­tive strate­gies; low-volatil­ity, tar­get-re­turn funds; and ETFs.

The past year has been the most ac­tive one for prod­uct in­tro­duc­tion at Franklin Tem­ple­ton since 2000, Green says. The firm ven­tured into new ter­ri­tory in Canada with the launch (to ac­cred­ited re­tail in­vestors) of Franklin K2 Al­ter­na­tive Strate­gies Fund, pre­vi­ously ac­ces­si­ble only to the firm’s in­sti­tu­tional clients in Canada. A re­tail ver­sion launched ear­lier in the U.S. has been hugely pop­u­lar.

That fund is di­ver­si­fied us­ing four in­vest­ing strate­gies and of­fers the ex­per­tise of sev­eral in­ter­na­tional hedge fund sub­ad­vi­sors. The al­lo­ca­tions in­clude: long/short eq­ui­ties; rel­a­tive value; event-driven; and global macro. The goal is to of­fer pro­tec­tion in down mar­kets with par­tic­i­pa­tion in up mar­kets.

The firm also in­tro­duced Franklin Tar­get Re­turn Fund, which seeks to con­trol volatil­ity and of­fer a re­turn of four per­cent­age points above the FTSE TMX 91-day T-bill in­dex over rolling three-year pe­ri­ods. The fund in­vests in growth, de­fen­sive and sta­ble as­sets. That mix changes with mar­ket con­di­tions.

Ear­lier this year, Franklin Tem­ple­ton took the plunge into the ETF mar­ket in Canada by launch­ing the firm’s first suite of four ETFs, in­clud­ing two ac­tively man­aged ETFs and two strate­gic beta ETFs. More are planned. The two strate­gic beta ETFs in­clude a U.S. eq­uity and an in­ter­na­tional eq­uity ETF; the two ac­tive ETFs in­clude a Cana­dian eq­uity ETF and a Cana­dian in­vest­ment­grade cor­po­rate bond ETF.

Green views the ad­di­tion of ETFs as an­other prod­uct line serv­ing the needs of fi­nan­cial ad­vi­sors and their clients — not as a re­place­ment for mu­tual funds. The com­pany’s ETFs are likely to be­come an ad­di­tional com­po­nent in its multi-fund strate­gic port­fo­lios, in­clud­ing Franklin Quo­ten­tial port­fo­lios. The ETFs also will serve the needs of ad­vi­sors and clients at­tracted to ETFs for their in­tra­day liq­uid­ity and lower man­age­ment fees.

Al­though there’s some “hu­man in­volve­ment” i n the ac­tively man­aged and strate­gic beta ETF port­fo­lios, they don’t du­pli­cate the strate­gies of Franklin Tem­ple­ton’s ac­tively man­aged mu­tual funds, the lat­ter of which still have an im­por­tant role to play, Green says.

“We need to be the quar­ter­backs, un­der­stand­ing ad­vi­sors and their chal­lenges and help­ing them build their busi­nesses and com­mu­ni­cate with clients,” Green says. “We of­fer not only a range of prod­uct so­lu­tions, but ac­cess to re­tire­ment spe­cial­ists, as well as high net-worth and other ex­perts to help ad­vi­sors use the ap­pro­pri­ate prod­ucts.”

Many ad­vi­sors now look to part­ner with in­vest­ment man­agers who can take care of in­vest­ment strat­egy, as­set al­lo­ca­tion and tac- tical shifts, leav­ing the ad­vi­sor to fo­cus on other as­pects of the fi­nan­cial plan­ning re­la­tion­ship, such as tax and es­tate plan­ning or in­surance needs, Green says.

Other ad­vi­sors are adding to their own in­vest­ing qual­i­fi­ca­tions and tak­ing on the role of a dis­cre­tionary port­fo­lio man­ager with in­vest­ment re­spon­si­bil­i­ties. Th­ese ad­vi­sors are look­ing for bestin-class in­vest­ments to pro­vide spe­cific niche ex­po­sure in a di­ver­si­fied port­fo­lio — such as emerg­ing mar­kets, al­ter­na­tive strate­gies or high yield — rather than de­mand­ing fund-of-funds port­fo­lios.

Franklin Tem­ple­ton has trimmed re­dun­dan­cies from its mu­tual fund prod­uct line, re­duc­ing it to 50 man­dates (ex­clud­ing cor­po­rate-class funds). That’s down from a peak of 72 in 2005. The pric­ing struc­ture also has been sim­pli­fied to have fewer vari­a­tions. Over­all, fees are lower.

Green, who spent his first years at Franklin Tem­ple­ton build­ing in­vest­ment-man­age­ment al­liances with in­surance com­pa­nies’ clients, views whole­sal­ing as more of a re­la­tion­ship busi­ness than ever. He points to Franklin Tem­ple­ton’s progress in this area, as in­di­cated by it re­ceiv­ing a 2016 DALBAR Canada mu­tual fund ser­vice award, mark­ing the 11th year in a row Franklin Tem­ple­ton has won the award in the bro­ker-dis­trib­uted cat­e­gory.

Last year also was the fourth straight year the firm has been in DALBAR Canada’s win­ner’s cir­cle for cus­tomer ser­vice over­all. Green says Franklin Tem­ple­ton is well di­ver­si­fied be­tween re­tail and in­sti­tu­tional busi­ness. A strong con­tri­bu­tion is made by sub­sidiary Fidu­ciary Trust Co. of Canada, which of­fers trust and es­tate plan­ning ser­vices.

“The new Franklin Tem­ple­ton is look­ing to part­ner with var­i­ous dis­trib­u­tors and in­ter­me­di­aries, con­sul­tants, ad­vi­sors and gate­keep­ers,” says Green. “Be­cause we don’t own a dis­tri­bu­tion arm, the for­ma­tion of strong re­la­tion­ships is vi­tal to our busi­ness.”

Green’s first job in the fi­nan­cial ser­vices busi­ness was in Wind­sor, Ont., as an in­surance sales­per­son for Met­ro­pol­i­tan Life In­surance Co. of Canada, a po­si­tion he took to gain a foothold in the fi­nan­cial ser­vices sec­tor af­ter grad­u­at­ing from the Univer­sity of Ot­tawa with a de­gree in eco­nomics in 1994.

In 1996, he ex­panded his qual­i­fi­ca­tions to be­come an in­de­pen­dent fi­nan­cial ad­vi­sor, then joined Clar­ica Life In­surance Co. in 1999 as an in­vest­ment prod­uct whole­saler. Clar­ica, which had taken over Metlife, be­came part of Sun Life As­sur­ance Co. in 2002. Green sold in­surance, seg­re­gated funds and mu­tual funds, gain­ing what he calls “a well-rounded set of ex­pe­ri­ences” be­fore join­ing Franklin Tem­ple­ton in 2004 as vice pres­i­dent, strate­gic al­liances, re­spon­si­ble for in­surance com­pany clients.

In 2008, Green was pro­moted to head up Franklin Tem­ple­ton’s en­tire Cana­dian in­sti­tu­tional busi­ness; then, in 2015, he be­came man­ag­ing di­rec­tor for Canada, re­spon­si­ble for re­tail, in­sti­tu­tional, high net-worth, mar­ket­ing, busi­ness op­er­a­tions and strat­egy groups. This gave him a multi-faceted view of the com­pany be­fore his pro­mo­tion to pres­i­dent and CEO in Jan­uary.

“I may have al­ways had de­signs on be­ing on the cor­po­rate side, but I wouldn’t trade my early ex­pe­ri­ence of sit­ting down and talk­ing with clients,” Green says. “It has given me per­spec­tive on what ad­vi­sors and clients need.”

The firm has launched sev­eral ETFs this year

PAUL LAWRENCE

Duane Green, Franklin Tem­ple­ton’s new pres­i­dent and CEO, is spear­head­ing a new chap­ter in the firm’s his­tory. Franklin Tem­ple­ton has launched a range of new prod­ucts al­ready, in­clud­ing al­ter­na­tive in­vest­ment strate­gies; low-volatil­ity, tar­get-re­turn funds; and ETFs.“We’re work­ing to change the per­cep­tion of who we are,” Green says.

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