Participants

Selene Oh; Head of Investor Relations; Franklin Resources Inc

Jennifer Johnson; President, Chief Executive Officer, Director; Franklin Resources Inc

Matthew Nicholls; Chief Financial Officer, Chief Operating Officer, Executive Vice President; Franklin Resources Inc

Adam Spector; Executive Vice President and Head of Global Distribution; Franklin Resources Inc

Benjamin Budish; Analyst; Barclays Capital, Inc.

Craig Siegenthaler; Analyst; BofA Securities Inc.

Alex Blostein; Analyst; Goldman Sachs & Co. LLC

Dan Fannon; Analyst; Jefferies LLC

Michael Cyprys; Analyst; Morgan Stanley & Co. LLC

Bill Katz; Analyst; Cowen & Co. LLC

Glenn Schorr; Analyst; Evercore Group LLC

Brian Bedell; Analyst; Deutsche Bank Securities, Inc.

Patrick Davitt; Analyst; Autonomous Research US LP

Presentation

Operator

Welcome to the Franklin Resources earnings conference call for the quarter ended March 31, 2025. Hello, my name is Rob, and I'll be your call operator today. As a reminder, this conference is being recorded. (Operator Instructions)
I would now like to turn the conference over to your host, Selene Oh, Head of Investor Relations for Franklin Resources. You may begin.

Selene Oh

Good morning, and thank you for joining us today to discuss our quarterly results. The statements made on this conference call regarding Franklin Resources, Inc., which are not historical facts or forward-looking statements, was in 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 just 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.

Jennifer Johnson

Thank you, Selene. Welcome, everyone, and thank you for joining us to discuss Franklin Templeton's second 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 momentarily, but first, I'd like to review some highlights from the quarter.
The first few months of 2025 have been marked by significant market turbulence globally resulting from heightened geopolitical trade policy and consequently economic uncertainty. As our clients try to separate the signal from the noise, we are positioned to help them navigate this period of market volatility and benefit from emerging trends.
Periods with major market resets often act as catalysts for client changes to asset allocation and portfolio construction. This is one key reason why our diversified company is designed to benefit a broad range of clients through various market conditions and cycles. With money on the move, Franklin Templeton is poised to help our clients grow their assets with leading capabilities across public and private investments.
Despite the volatility, we continue to see strong client activity across our key growth areas. For instance, our institutional one-but-unfunded pipeline increased by $2.3 billion to $20.4 billion during the quarter, its highest level since 2022. One of our firm's greatest strengths is the depth and breadth of perspective provided by our specialist investment managers who offer investment expertise across the full spectrum of asset classes. This comprehensive expertise is increasingly valuable as asset owners seek to consolidate relationships with managers who can offer a full range of investment solutions across geographies.
By partnering with Franklin Templeton, clients gain access to broad capabilities delivered through a single integrated global platform. We provide deep industry insights to help clients protect wealth and unlock opportunities for growth. In April, for instance, the Franklin Templeton Institute delivered timely insights, adviser materials, and webinars to help clients make sense of headlines and uncover new opportunities. In the days following April's tariff announcements, the Franklin Templeton Institute held a dozen webinars attended by over 11,000 advisors.
Today, our firm reaches all corners of the world. Since our first office outside of North America opened in 1986 in Taiwan, international markets have been a key part of our growth story. As one of the first global firms to establish local asset management capabilities over 30 years ago, we have offices in over 30 countries, and our clients are located in over 150 countries.
Our goal is to manage each local business on a global scale, focusing on local investing and client needs. We have $470 billion, or about 30% of our AUM in countries outside the US, and approximately 50% of our employees work outside of the US. Within public equity markets, obviously there were several notable developments that unfolded during the quarter, reflecting a broader shift in global market dynamics.
For the first time in many years, several foreign markets outperformed US indices, signaling a potential reversal of long-standing trends. As we've been anticipating, in the US and abroad, equity performance has broadened beyond the narrow leadership of the Magnificent Seven as investors rotated into other sectors, styles, and regions. Europe outpaced the US, and the US dollar weakened.
We also saw striking reversals in other areas. Bitcoin declined, while gold surged almost 20%, the largest quarterly gain in US dollar terms in over 40 years. The so-called DeepSeek moment sparked questions around the need for AI-related spending, contributing to a pullback in previously high-flying areas. Meanwhile, sectors like financials, healthcare, consumer staples, and utilities have led the market year to date, underscoring the shift in investor sentiment and sector leadership.
For the remainder of 2025, our investment teams remain cautiously constructive on the outlook for global equity markets. Their caution stems from uncertainty tied to softer US growth, driven in part by cuts to federal government employment and services, as well as the ripple effects of newly implemented US tariffs and retaliatory measures, particularly from China. The primary concern is an erosion of profitability related to weaker global economic activity and margin pressures as tariff costs filter their way through supply chains.
Within US equities, a key theme remains broadening as investors seek out returns in companies with durable earnings support and favorable valuations. While we've seen sharp declines in the technology sector, including the Magnificent Seven, some recovery of mega-cap stocks is likely. European stocks, particularly in areas related to defense spending and infrastructure, will benefit from stepped-up government expenditures as Europe addresses its security concerns.
While new tariffs could be significant and a likely drag on global growth, our consensus is that a recession in the US is not a foregone conclusion. It's important to note that the economic impact of tariffs will likely be asymmetric, affecting the US far less than our trading partners. The US economy, with its $30 trillion size and only about $3 trillion in exports, is probably better insulated from recession than countries whose economies are more dependent on exports.
Turning to the rate market, the recent quarter has been dominated by uncertainty on US trade policy and its potential economic fallout. The execution of the tariffs rollout has exacerbated market volatility. Nonetheless, it has also cast a spotlight on the actual problem of large persistent trade deficits, which over time does need to be addressed, including through smaller US fiscal deficits.
The US economy came into 2025 with strong momentum. While last quarter's GDP contracted by 0.3%, this largely reflected a surge in imports ahead of tariffs. Household consumption has remained relatively robust, and so far, labor markets have proved resilient. Confidence indicators have weakened, and many corporations have paused investment plans So underlying activity could well weaken somewhat in the current quarter.
However, if the administration's focus reverts to tax cut extensions and deregulation, this, together with progress on trade negotiations, should provide support for growth and allow the US economy to avoid a recession this year. Bond yields have experienced high volatility but appear most recently to have become range bound at levels consistent with relatively resilient economic growth.
We continue to expect one more rate cut by the Fed this year with additional monetary easing possible should growth deteriorate more sharply. Tariff-driven price pressures and a still large fiscal deficit seem likely to exert some upward pressure on yield. Market volatility is likely to remain elevated until we get greater clarity on trade and fiscal policy.
Turning to private markets, 2025 started with optimism for a more business, tax, and regulatory-friendly environment with more IPOs and greater M&A activity. Heightened policy, uncertainty, and recent setbacks in global equity markets have tempered enthusiasm, particularly for IPOs and M&A activity. However, we believe that increased market volatility may spur interest in secondary private equity offerings as sources of liquidity. The undercapitalized secondary market enables firms like Lexington Partners to be highly selective and focus on quality assets as they deploy capital consistently during the year.
Furthermore, these market dislocations can create attractive buying opportunities for this asset class. Increased market volatility also creates an attractive backdrop for our alternative credit businesses like direct lending, real estate credit, and special situations. In these markets, where there is greater dispersion between the best and worst credits, Benefit Street Partners is well positioned given its conservative approach to underwriting and our deep portfolio management expertise.
Meanwhile, real estate valuations have declined significantly from their 2021 peaks, and our investment teams are finding selective opportunities in areas such as industrials, housing, and healthcare. Market dislocations and global volatility often create opportunities for active managers like Franklin Templeton that offer a full range of investment capabilities as reflected in our institutional one-but-unfunded pipeline, the highest it's been in three years.
The pipeline remains diversified by asset class and across our specialist investment managers and is particularly strong in Franklin Templeton fixed income. The combination of unpredictable fiscal policies, trade uncertainties, and geopolitical tensions require a balanced approach. Now turning to highlights from the quarter, our results demonstrate progress across our business.
Our assets under management continue to be well diversified across specialist investment managers, asset classes, vehicles, and geographies, and ended the quarter at $1.54 trillion. This was a decrease from the prior quarter due to the impact of long-term net outflows at Western Asset and negative markets. Excluding reinvested distributions, long-term inflows increased 9% quarter over quarter.
This quarter, gross sales increased across all asset classes. Long-term net outflows were $26.2 billion, including $3.3 billion of reinvested distributions. Excluding Western, long-term net inflows were $7.4 billion. Ex-Western, we were net sales positive for the last six quarters in a row. Multi-asset and alternatives generated a combined $9.7 billion in positive net flows. Equity long-term inflows were $38.9 billion, and gross sales have increased for the past six consecutive quarters.
Given the risk-off environment, equity net outflows were $5.4 billion, primarily reflected in growth strategies. We did see positive net flows into large-cap value, smart beta, and international strategies. Fixed income net outflows were were $30.5 billion. However, excluding Western, fixed income net inflows were $2.8 billion and were positive in multi-sector munis, stable value, and high-yield strategies.
Franklin Templeton fixed income continues to see positive flows and maintains a strong one-but-unfunded pipeline. Fundraising and alternatives generated $6.8 billion for the quarter, of which private market assets totaled $6.1 billion and were broadly distributed across strategies. Aggregate realizations and distributions were $2.8 billion.
We see a significant opportunity in the wealth management channel for our alternatives business. Based on our data and calculations, we project that approximately $800 billion will be allocated to democratize alternative industry-wide over the next five years And as I've mentioned before, this is a key focus of growth for us.
Over the past several years, we have acquired relevant alternative asset management capabilities, built a dedicated distribution effort, and have had success placing our products on a number of leading platforms. As a result, so far today, a little over 10% of our alternative assets are from the wealth channel. We have learned a great deal about this opportunity, but it's still early days. As alternatives by Franklin Templeton continues to progress in the wealth management channel, it is imperative that we continue to deliver innovative, top-performing solutions as well as a first-class client experience.
This quarter, we launched our first perpetual secondaries private equity fund, the Franklin Lexington Private Market Fund, in the US and internationally. Designed for wealth channel clients, these funds raised an initial combined $2 billion. We now have three perpetual offerings in the major asset classes, secondary private equity with Lexington, real estate debt with Benefit Street Partners, and Clarion's real estate equity. All three of these strategies are north of $1 billion in assets.
Since January, we are one of the top 10 largest fundraisers of perpetual funds and the largest traditional asset manager. As for multi-asset, we saw net inflows of $3.3 billion led by Franklin Templeton Solutions; our custom indexing platform, Canvas; Franklin Income Investors; and Fiduciary Trust International, our private wealth management business.
Turning to investment vehicles, we saw strong client demand and positive flows into ETFs, retail SMAs, and Canvas. Our ETF business saw its 14th consecutive quarter of positive net flows, attracting $4.1 billion during Q2 and a record-high AUM of $37 billion. Twelve of our ETFs now are over $1 billion in AUM, ten in the US and two non-US. The growth of our ETF business reflects our commitment to staying at the forefront of innovation.
During the quarter, we launched the Franklin Crypto Index ETF, which offers investors indirect exposure to the two largest digital assets, Bitcoin and Ethereum, through a single investment vehicle. The Franklin Crypto Index ETF is our third digital asset ETP launch in just over a year. We also launched Europe's first-ever tokenized usage fund, the Franklin Unchained US Government Money Fund.
The retail SMA market has experienced considerable growth in recent years, and this trend is expected to continue. From 2022 to 2024, industry wide, SMAs saw 30% asset growth and are expected to reach $3.6 trillion by the end of 2027, from $2.4 trillion today due to tax advantages and lower minimums.
Our retail SMA AUM was $144.2 billion, with net inflows of $1.5 billion; and excluding Western, had record net inflows of $3.2 billion. Our non-US business saw positive net flows in the EMEA and Americas regions, ending the quarter with approximately $470 billion in AUM. As previously mentioned, we benefit from the geographic diversification of the firm.
Now in terms of investment performance, over half of the mutual fund AUM is outperforming its peer median across the one-, three-, five-, and 10-year periods. Compared to the prior quarter, investment performance improved in both the one- and five-year periods, with one of our largest funds managed for yield now outperforming for those same periods. Over half of strategy composite AUM is outperforming its benchmark over the three- and five-year periods, and 63% doing so over in the 10-year period.
Turning briefly to financial results, adjusted operating income was $377.2 million, a decrease of 8.6% from the prior quarter. The decrease was primarily due to compensation expense related to the start of the calendar year and the impact of Western, partially offset by the prior-quarter annual deferred compensation acceleration for retirement-eligible employees.
As always, we continue to focus on disciplined expense management. In January, we announced that Western would integrate select corporate functions into Franklin Templeton, creating efficiencies and giving Western access to broader resources. After careful planning, we've begun the integration of certain functions across back office, middle office, and support teams. Importantly, as with all specialist investment managers, Western's investment team will maintain its autonomy. Our top priority is to ensure this process is seamless to clients.
Notwithstanding the recent market challenges, we remain on track in terms of the five-year plan presented at fiscal year end, including priorities across public and private markets, distribution, private wealth management, and innovations in digital assets and technology. These, combined with disciplined expense management and operational efficiencies, as well as effective capital management, will allow us to deliver value to our clients and shareholders over the long term.
Finally, this quarter, we were excited to bring our New York-based employees together in a modern space with new technology. We relocated employees from 10 separate Manhattan office buildings into One Madison Avenue. We have already hosted clients from around the world, and the response has been overwhelmingly positive.
At Franklin Templeton, we are driven by a shared mission to help people all over the world achieve their most important financial milestones. That mission remains constant, even as the industry and our organization continue to evolve. A key to that focus is understanding their unique goals and being their trusted partner in navigating the complexities of the market together.
We have built an all-weather platform that mitigates concentration risks across specialist investment managers, asset classes, vehicles, and geographies for the benefit of all stakeholders. And importantly, I'd like to thank our talented and dedicated employees for their commitment, efforts, and always putting clients first.
Now let's open the call up to your questions. Operator?

Question and Answer Session

Operator

(Operator Instructions) Benjamin Budish, Barclays Capital.

Benjamin Budish

Hi, good morning, and thank you for taking the question. Just curious, last quarter, we got some guidance on how fiscal-year expenses should shake out comp and benefits, some of the other line items. Just curious how you're thinking about that now, just given some of the market movements and the natural pressure on AUM. Where is there some flex in the model? How should we be thinking about the range of outcomes for the year? Thank you.

Matthew Nicholls

Yes, why don't I take that? It's Matt. Good morning. Bear in mind that we ended April at about the same AUM, a little bit below, but it's going to be about $1.535 trillion, maybe a little bit higher, of AUM where we started the month. So we know, obviously, that April was very volatile in the markets, but just bear that in mind. And what I'll do is I'll give you the quarterly guidance and I'll talk about the annual that I touched on in the last quarter.
So we expect our effective fee rate for the third quarter to remain in the 38-basis-point area. We think that that may increase a little bit going into the fourth quarter to finish the year, but 38-basis-point area. We expect competent benefits to come down to around $810 million, assuming that we have $50 million of performance fees. We expect IS&T to be $155 million. That's up slightly driven by the fact that we added a vendor in IT.
That means that we'll have two vendors overlapping for a period of two quarters that added about $3 million. That's not too far different from last quarter, but just up a few million dollars. Occupancy, we expect to remain flat at around $70 million. We are shedding the double rent at One Madison, and we have about $3.5 million to $4 million of that left for the next quarter. And that will lead us to about $70 million, so flat to the last quarter. And G&A, we expect to be also very similar to this, to the quarter we're reporting today at around $185 million.
In terms of the full-year guidance for full-year '25, adjusting for the additional quarter of Putnam, and excluding performance fee compensation, we expect our expenses to be roughly flat to 2024 -- very similar to 2024. We continue to make important strategic investments in the areas that Jenny mentioned in her prepared remarks, in alternative assets, ETFs, Canvas solutions, including digital assets in particular, and are funding these with cost saves elsewhere in the business.
While our expenses are expected to be flat to last year for fiscal 2025 adjusted for platinum and performance fees, as I mentioned, it is important to note that we're being disciplined with the circulation of savings -- additional savings in the business into those very significant growth areas for us. And then I'll finally say that in the last quarter, I mentioned fiscal 2026 because obviously, we're managing through the Western situation where we've had revenue declines there, but we're supporting the team in terms of expenses that's impacted our margin, again, that I explained last quarter.
But I said that we had several expense initiatives underway at both Franklin and Western, and these are expected to position us to enter fiscal 2026 with about a $200 million to $250 million run rate of cost savings going into '26. Just to be clear, that's fiscal 26. So fiscal '25, we expect a flat situation. In fiscal '26, we expect to achieve $200 million and $250 million expense savings.
The only caveat to this is that, as Jenny referenced in her opening remarks, we have several quite significant growth areas in alternative assets. If we grow faster in some of these areas, those additional sales and fund-raises do come with additional expenses, which we will highlight in the event that we're in that situation.

Benjamin Budish

All right. That was very detailed. Thank you very much.

Matthew Nicholls

Thank you.

Operator

Craig Siegenthaler, Bank of America.

Craig Siegenthaler

Thanks. Good morning, everyone. My question is on the positive long-term net flow trend ex-Western. And I'm wondering, do you have an estimate for the base fee organic growth rate, including Western? And I'm curious, just given how the lower fee rate on that Western business is, and you can see that your blended fee rate is rising. And if you don't have the numbers handy, high-level commentary would be helpful, too. Thank you.

Jennifer Johnson

Yes, I mean, it's a little hard to tell. I can't tell you exactly what the organic growth percentage is. But if you just look at this quarter, right, excluding Western, long-term debt flows were about $7.4 billion. I think what's particularly positive is, excluding Western, the fixed income flows were positive of $2.9 billion. But interestingly, Franklin Fixed Income actually had positive flows of $5.4 billion.
And you can see in our one-but-unfunded institutional pipeline which is up. The biggest SIM in that is actually the Franklin Fixed Income, which historically wasn't known for being an institutional manager. And you can see -- and part of that is the great performance and contributions of Putnam. Part of that is, I think, some of the changes that's sold to SAI has made over time. And so they're becoming a much more institutional manager, and you can see that in those numbers.
If you look at private markets, we had $6.8 billion in alternatives fundraising, of which $6.1 billion is private market, so that's positive. Multi-assets have been positive. Some of the biggest growth areas with vehicles have tremendous growth rates. The $4.1 billion in ETFs is on a base of $37 billion. And we have 135 ETFs. We're selling them in all regions. So it's a great opportunity.
Our SMA business is $144 billion. We have 200 individual SMA types of products there. And the thing about SMAs is it's actually complicated to get them set up in the SMH channel. So the fact that we have such diverse SIMs all contributing to the SMAs, a big area of growth, we think is a great opportunity. Ex-Western with positive flows in the US, with positive flows internationally.
So the challenge has obviously been that it masks a bit of the really important growth that's happening. But in the areas where the industry is growing, we're growing, and in many cases faster than that. And we're growing in the places we want to grow. So I think all of those bode very well. And again, when we just look at -- obviously, equities are outflows as an industry. But you look at what's happened with Putnam, I think they're up quarter over quarter from acquisition, 82% in inflows.
When you take great performance and you add it to the global distribution platform that we have, that combination can be very positive even for active equities. And of course, market times like this and volatility, people are reminded why active management matters. Active managers have to think about risk-adjusted returns. And I always say, nobody talks about how beta gets more risky over time and when you have a concentration, and active managers have to consider that.
So volatility is great fertile ground for active managers. You got to prove it, and I think our performances continue to improve. So all those things, we think, are really positive. And again, I think the global breadth of our distribution -- and no other firm has the local asset management capabilities that we have in these big growing markets like in India. We have local managers. 80% of flows in markets tend to go to local managers. We're local in so many of these markets. I don't have that -- I don't know if I bought Matt time to calculate it or Adam, so go ahead and you guys can add to it.

Matthew Nicholls

Yes, two -- I'll just add two things. One, the effective fee rate of the assets that we have at Western is in the high 15-basis-point area, so 15.8% to, I think, 16%. The other thing I'll point out is, for April, it's really -- it's obviously early. We're reporting this next week. But ex-Western, our lows are about flattish for the month, and that's in a very volatile month. That's worth noting as well. Month by month can obviously change quite a bit and lead to the results at the end of the quarter, but it's worthwhile pointing that out as the month was so volatile.

Adam Spector

Matt, I would only add that Jenny talked about having strong sales growth in areas where the industry is growing. But even where the industry is shrinking in places like active equity, our growth sales are up six quarters in a row now. So we really do see strength across the business, growth sales up in every region, in every asset class this quarter.
And when it comes to fees, fees are really going to be impacted by asset mix. And I would only comment there that our business is far more diversified than it once was. If we look at our top 10 selling strategies for the quarter, three were in equity, three were in fixed income, three were in alternatives, and one was multi-asset class. So a very diversified business, but with obviously different fee rates. And where we win more will impact what that fee rate ends up being.

Craig Siegenthaler

Thank you.

Operator

Alex Blostein, Goldman Sachs.

Alex Blostein

Hey, Jenny. Good morning, everybody. I was hoping we could dig in a little more into your comments around private markets and the traction you're seeing there. I guess, first, would love to get your insight on how the retail products have done through April amid obviously all the volatility. It seems like the industry's held up quite well. Curious if you're seeing something similar.
And I guess when you zoom out a little further, I believe Lexington will be in the market with their large flagship secondaries fund. It's an area where there's quite a bit of bright spots and good momentum in that business for the industry as well. So curious how you're thinking about sizing that as well and what that ultimately means for your aspirations for growth in private markets management fees over the next 12 months.

Jennifer Johnson

Sure. So a couple things. So one is let me just -- because we had guided originally to $13 billion to $20 billion in the private markets. and we're at $10.4 billion so far. So we've raised in alternatives, I think, $12.1 billion or something. But of that, $10.4 billion is in private markets. So we're edging up closer to the lower end of the range. And the message was we'd be on the higher end of the range if Lexington had a first close in September, which we thought was unlikely but a possibility. We now think that that is pushed out further.
But the kind of -- again, this quarter at $6.1 billion -- and by the way, that is well represented from BSP-Alcentra, so private credit; Clarion with real estate; as well as Lexington. And Lexington had obviously the FLEX and FLEX-I funds, which raised $2.1 billion, plus they're in the market with their a continuation vehicle in their middle market, so they're getting flows there. And Franklin Venture also had flows. So that $6.1 billion represents all four of our alternatives managers.
We think, going forward this year, since Lexington probably will push -- the close will be more towards the latter of '25, potentially even early '26, and I'll talk about what we think that opportunity is there in a second. They're still going to come in probably right in the mid-range of that original range, just because of the strength of the other areas that we're getting good, positive flows in.
Now the question around when we see the opportunity is, look, the wealth channel is just a massive opportunity. Today, advisors have about 5% of their book to alternatives. They'd like that number to be closer to 15%. Our internal calculations is in the next five years. That's $800 billion. But if you read Goldman's numbers and others, you're talking like $4 trillion. It's just massive. And our ability to combine the product breadth that we have -- and I think we're pretty unusual, maybe one other firm has something similar, with our DNA in the wealth channel.
And again, selling alternatives in the wealth channel is hand-to-hand combat, the first and probably easiest thing is to get on the platform. The challenge goes into the education of individual financial advisors, making sure from a suitability -- because they have to decide client by client what's suitable, and then also having the tremendous product capability that you have.So think about today, we have three evergreen perpetual products that are $1 billion or more, one for Clarion, one for BSP with BSP's Real Estate Debt Fund, and now Lexington FLEX.
So we have tremendous product capabilities there that are perfect for that channel. So we think that really good opportunities -- and then we have 90 people who are just dedicated, and we've built this over the last few years, to being able to support our market leaders as specialists who are helping our market leaders out there with advisors to think about how to sell those products.And I think the success that we've had on FLEX demonstrates really what that opportunity is.
Now with respect to Lexington's Fund 11, they would tell you that the time in the market, it is absolutely a tremendous time to be in secondaries. The challenge, of course, is that the LPs are sitting there with less realizations than they've had. And to put that in context, between '21 to '24, they were usually getting cash flows from realizations kicked off from their alternatives, proposed around 20% to 24% of what their AUM in that area was. That's cut in half.
So in order to fund their future opportunities, they have to be able to come up with cash. And that's where you're seeing that they're going in and talking to Lexington. So as far as opportunity to put money to work and therefore being able to scale the evergreen fund alongside with their traditional funds, it's just a tremendous -- they have no concerns about the ability to put that to work.
And then what's happening is, you have managers. They recognize the opportunity in the secondary space. And so they want to do it. They just have to figure out ways to make that space in their portfolios. But they're actually afraid of missing out on this vintage. And so Lexington intends, as you would expect, this fund to be bigger than Fund 10.
I ask the question, is there any concern that FLEX and FLEX-I would in any way cannibalize the 20% that you raised in Fund 10 in Fund 11? And no, they're confident that it is really focused on a different group. And so we think really that FLEX and the evergreen funds, the perpetuals there, have actually just opened up to a broader section of clients. So I don't know, Matt and Adam, if there's anything you want to add here.

Adam Spector

Yes, Jenny, the only thing I would say is that you're right. The launch of three-scale perpetuals allows us to constantly be in market and just being there, talking to advisors, giving all education gives us continued momentum. But that also helps us with our draw-down races. And it's not just the Lexington flagship where we can raise money from the retail channel. It's things like co-invest in continuation vehicles, middle market. Those products also have good momentum in the retail channel and are helped by the fact that we're always in market with the perpetuals.

Alex Blostein

Very helpful. Thank you.

Operator

Dan Fannon, Jefferies.

Dan Fannon

Thanks. My question is on fixed income. You mentioned flows ex-Western being positive. Could you expand upon some of the strategies that are seeing that success? And then also just an update on Western and where you think you are in the redemption trends and the conversations they're having with clients, and just an overall update on the health of that subsidiary would be helpful. Thank you.

Jennifer Johnson

So I'll start on Western, and then, Adam, why don't you cover the fixed income strategies that we're getting most traction in? So look, Western, good news is during this really volatile time, Western's performance has been very good. We feel confident that the team is stable, engaged, and very motivated. I think it's important to remember, Western is a $245 billion asset manager on its own. So it has scale and size on its own.
April has $10 billion in outflows, which was anticipated. Obviously difficult, but that is the reality. But I think it masks the fact that they also have $5 billion in gross sales, and they continue to be part of the institutional one-but-unfunded pipeline. So institutions are still allocating to Western. They still have great relationships with their with a lot of insurance companies, strong muni, and cash franchises, still getting flows into Core and Core Plus. So there's still support there.
And then I would just say, again, this demonstrates, I think, the strength of our model. If you look at Franklin in the past, we had oftentimes real concentration on very successful products. Now we have true diversification across. And so you look at the flows that are going into both the private credit side of the business as well as Franklin Fixed Income. And the good news is we're able, despite having one SIM going through a difficult time, to be able to pivot and have -- and capturing the opportunities in the market in fixed income with other SIMs. And, Adam, you want to talk about the specific?

Adam Spector

Sure. If I take a look at where we're having specific success, munis was one area where we raised about $1 billion in munis. That was a really strong area for us. We also saw good flows in stable value and high yield as well where we have a number of top-performing products. The insurance sector is something that's been strong for us across the board. And in customized and corporate strategies there, we've seen very good flows. And depending on how you want to bucket CLOs, with $2 billion raised in CLOs, that's been quite strong for us.
Short duration is the other area. We see that clients on both the retail and institutional side, US and non-US, want to keep a little powder dry until the rate situation clarifies a bit. And for that reason, we've seen very good flows into our short-duration products. The final thing I would note is that depending on how things unfold on the macro side, we're very well positioned in some of our non-dollar fixed-income products, and we think that flows could well accelerate there as well.

Jennifer Johnson

And I just want to -- because I gave a little bit of information in April, those numbers are preliminary. We do anticipate, despite this incredibly volatile time, to be about flat in April as far as flows.

Adam Spector

And from a fixed-income standpoint, if we look at things going forward, about half of our one-but-unfunded pipeline is fixed income, and the largest single component of that is Franklin Fixed Income.

Operator

Michael Cyprys, Morgan Stanley.

Michael Cyprys

Hey, good morning. Thanks for taking the question. I was hoping you could spend a moment on your international business. You guys have a pretty broad, large overseas footprint. I was hoping you could elaborate a bit more on how it's contributing to revenues and flows today, where you're seeing the most traction overseas. And if you could talk to some of your initiatives to help accelerate the growth from overseas, and particularly how you see demand evolving for non-US strategies in this backdrop. Thank you.

Jennifer Johnson

Great. Adam, do you want to take that?

Adam Spector

Yes, look, we were positive in terms of our momentum in gross sales in every region. And we are, as Jenny said in her remarks, in over 30 countries on the ground. That allows us to play as a local player with locally oriented and global product in most of the markets we serve. Some of the trends we see are regional specific. For instance, Australia tends to be a more alternative-oriented market for us. Asia tends to be a more income-oriented market for us. There's some things like US technology that tend to sell well for us across the board.
In terms of how we're set up, our business in Asia tends to be a bit more institutionally focused than in some other markets. And I would say a market like Canada tends to have most of the hand-to-hand retail distribution that we see in other places. If we look at our success, Core sales is doing well in all of those markets. Our bumpiest ride this quarter was probably in the APAC region, and that's just because we happen to have a number of large institutional clients there who were de-risking their portfolios. And we were on the riskier side of the asset allocation there in terms of our exposure to equities and higher return on fixed income products.
Nothing I think that is telling about the future, but the Asian market does tend to be more institutional, and we were on the wrong side of some allocations there this quarter. If we take a look at the overall AUM, it is about $470 billion outside of the US. And for this quarter, we are net flow positive in both the EMEA and Americas regions with gross sales up in every region.

Operator

Bill Katz, TD Cowen.

Bill Katz

Great. Thank you very much. Can you guys just clarify just the flows that WAMCO -- was the $10 billion, was that the net of the $5 billion or is that the net outflows? And then the broader question, Jenny, it seemed like you put together a pretty strong platform that can invest across credit bolts or private markets, both public and private.
But there have been a number of alliances coming up around you and [KQR Capital Group], I think, a couple weeks ago now, Blackstone, Wellington, and Vanguard. What you're thinking strategically about setting up an alliance that might accelerate the opportunity set as the public-private world becomes more intersected? Thank you.

Jennifer Johnson

Yes, thanks, Bill. Actually, I knew it when I said it that I probably confused it a little bit. It is a net outflow number that is inclusive of the $5 billion in gross sales. I was just trying to make to the point that there are clients still allocating. But as you can see, there's obviously redemption pressures there at Western.
Look, I think that, in my view, I think we are incredibly fortunate to have the stable of alternative capabilities that we have, that we did it early, and it's going to be extremely difficult for traditional managers to build that capability. One is it's virtually impossible to do organically. It's really hard to scale organically, especially this mature in the alternative space. And honestly, the write-off that we have this quarter was our attempt to do a private equity climate alpha fund organically.
And so -- but to be able to go out and acquire is difficult. And if you're a partnership, it's impossible. So one is I am incredibly pleased with the product capabilities that we have. And I have to tell you, just take the F Brand product, which is the real estate debt fund, that actually came out of a conversation that the BSP team, they have about $10 billion -- they had at the time $10 billion about real estate debt. And they thought, well, gosh, if we have to foreclose on a property, we don't run properties. We should talk to Clarion and get some advice from them.
And in those conversations, Clarence said, hey, there's been a real retrenchment of regional banks in the real estate debt funding. You guys should think about that. And therefore, we launched that product that came out of literally the leadership teams of two different SIMs just talking. That, to us, is the great opportunity. And so when we look -- we have done partnerships.
We launched a partnership with Apollo in the DC space where I think it's Leaf House, where Clarion is a slave, Apollo is a slave. So we're going to do those two. Where we think the great opportunity is going to be going forward is actually -- now just imagine you're a research analyst and you only cover, say, high yield, and you don't have any insights into what's going on in the private market. It's literally like managing and researching with half the data.
So we actually think over time, the ability to think about how these teams are structured and how you have to be careful because there's ethical walls and information walls that are there, but how they're structured to be building products and gaining insights that it's going to be better, that the managers are under the same umbrella instead of just being sleeves.
And then the final piece is it's not clear whether the gatekeepers want managers to put together their own partnership or whether they want to serve in that role where they're selecting who the two sleeves are. And so I think that remains to be seen. But I have to say, I like where we are. We are both open to partnerships as well as able to build products and opportunities across private and public ourselves.

Bill Katz

Thank you.

Operator

Glenn Schorr, Evercore ISI.

Glenn Schorr

Hello there. A follow up on private markets, if we could. So I watch a lot of basketball, so I've seen a lot of the Franklin Templeton -- alternatives by Franklin Templeton advertising. It's been, I think, good general brand building. I'm curious, when it gets towards -- if it gets to specific products or if that's a hand-to-hand thing in the channel.
And then bigger picture, I think a lot of us agree with your $800 billion over the next five years. Probably a lot of us would take the over. How much of that do you think you touch through Lexington, Clarion, and BSP? And do you have interest in building out the asset classes within private markets that you wouldn't be touching right now that are part of that $800 billion expected growth?

Jennifer Johnson

Great, thanks. I'll start, and then, Adam, please feel free to fill in. So first of all, I think that the only thing we don't really have is infrastructure if that actually takes off in the private space. But the private markets in the wealth channel, it matters. What is your distribution capabilities? Our DNA is in the wealth channel. We sell to 100% of an advisor's book, which means we have more people out there touching the advisor. And then when you find the advisor interested in in alternatives, we can bring in both the education from our academy and our institute as well as one of the 90 specialists who can focus on alternatives.
So our ability to cover the globe on in the wealth channel with just scale of people, I think it's going to be difficult for the folks who are just alternative managers to be able to do that. The second thing is -- so one, it's that education. The second thing is, do you have the capabilities? And as I said, other than infrastructure, I think we cover it completely.
And the third is, do you have the right vehicles? And the fact that we're sitting here today with Clarion, BSP, so private credit, real estate, and secondaries with perpetual products that are over $1 billion, so you immediately have scale, is just a huge opportunity versus others who are going to try to enter the market. And I think that -- we told the story about the success we had with Lexington Funds 10 in the wealth channel with a large distributor. And, Adam, I think it's something like 44% of the advisors, correct me on what the number is, had never sold an alternative product before.
The fact that our FLEX Fund, when we came out, we just launched it with a couple of distributors and some small RAs. And we ended up shutting it off early because we were worried about the ability to source deals and keep the quality of deals versus keeping too much in cash. So we literally slowed it down and then didn't open it up to more firms as quickly as we thought because we wanted to make sure that we could source those deals and get the cash to work.
Unlike a drawdown where you're calling the money when you need it, the challenge you always have in professionals is if you end up with too much demand and you can't source good deals, you're going to be -- your performance is going to fall a little bit. And so it's clear that there's huge demand there. And then the fact that we were able to take FLEX-I internationally and raise just under $800 million in the first quarter, I think, again, demonstrates the breadth of our capability of support there. Adam, you want to add anything to that?

Adam Spector

I would only add, Jenny, that when we raised the money for FLEX and FLEX-I, we did it really with significantly only two partners because we wanted to launch and launch right and have an appropriate escrow process. We are about to broaden that group out and are working on doing that. I don't have significant demand there. That really should help us.
The other thing I would note is that there are different types of advisors. You have -- at the high end, you have private bankers who have been doing alternatives for years, have well-diversified portfolios, and might be adding drawdown funds. You have others who are going to want to do perpetual products like FLEX, [FB Red, CP Rex], et cetera.
But what we're starting to do now is to talk to advisors who have never done alternatives before. and the fact that we have such broad reach on the traditional side is allowing us to get that access early and provide that education. Our belief is that being the first one in to provide that education is going to allow us to execute on sales in the coming quarters.

Matthew Nicholls

And the only thing I'd add is that we do actually have liquid infrastructure, and we do have infrastructure debt. We have infrastructure debt, although it's a little bit smaller. To Jenny's point, we do want to add private equity infrastructure. And to Jenny's earlier remarks, I think the only way for us to really do that is to acquire something. So over time, we've mentioned this on multiple calls, we're likely to do that in some form or another.

Operator

Brian Bedell, Deutsche Bank.

Brian Bedell

Great, thanks. Good morning. Thanks for taking my question. Maybe just go back to the $470 billion, first, can you clarify? I think that's by the region where the product is domiciled as opposed to the strategy. And this is on slide 6, I think, by region. And if you can clarify that. And then the question really is if there is a rotation away from US strategies into non-US strategies.
How are you positioned from that dynamic within these regions? So would they be potentially selling Franklin US strategies? But then are you positioned well to capture that flow into non-US strategies? And then I guess even more broadly, how do you feel you're positioned if there's just a general client shift in terms of competition versus other peers?

Adam Spector

Okay, great. So the $470 billion really is where the AUM is sourced for, not what we're investing for. So that $470 billion is sourced from outside of the United States. I think if you see investor behavior, there were a few shifts we saw recently. One of them was a preference for non-dollar assets. I think that was the right investment decision if you take a look. If you take a look, especially on the smaller cap markets, if you look at German small and mid-cap versus US small and mid-cap for the recent period, that was one of the strongest trades out there.
So there was a performance difference, and I think that drove some of the allocation. We are well-positioned and have a number of international and global equity products. In fact, that's some of the hallmarks of what we're known for outside of the United States. So that trend, I think, actually bodes well for us.
The other thing I would say is that if there were two trends we saw in allocation on the equity side, one was a little more to non-dollar. The other was a shift from growth to value. To the extent that you're buying growth stocks, you have to predict a little further into the future. I think the future is a bit murkier to us all right now, and that gives value stocks a bit of an advantage in the minds of many investors, especially where valuations are. So we have seen a shift of allocations from growth to value on the equity side. That's another area where we have some relative strength.

Brian Bedell

Great color. Thank you.

Operator

Patrick Davitt, Autonomous Research.

Patrick Davitt

Hey, good morning, everyone. You mentioned the insurance channel earlier. In that vein, could you update us on where the Great Western relationship stands? How much of their initial commitment is still left to fund? And any new potential commitments in the works? Thank you.

Jennifer Johnson

Great. Matt, do you want to take that?

Matthew Nicholls

Yes, so first of all, we formed a really great relationship with the Power Group of Companies. Out of the initial $25 billion that they agreed to allocate to us, we have about three to four left, I think. So we're in the low $20 billion. So that's that, but we continue to explore many other different avenues of growth across our franchise and their franchise. So let's say that that partnership is living up to its expectations in terms of what we described when we announced the transaction.
In terms of the Putnam aspect of that overall transaction, I think we mentioned this on the last call. We really couldn't be happier with the strength and quality of that team. And the output speaks for itself. We have almost, I think, $30 billion of net new flows from Putnam since we closed the transaction last January. I don't know whether, Adam, you have anything to add to that.

Adam Spector

I would only say that just in terms of the future, we have had success in the insurance channel. We recently got some significant mandates from an insurance company that consolidated from 20 or so managers down to four. We're in discussions with others for similar types of opportunities and feel that we offer these clients, really, a breadth of opportunity, especially in a channel where so much of the allocation goes to alternatives. We are very well positioned.

Patrick Davitt

Thank you.

Operator

Thank you. This concludes today's question-and-answer session. I would now like to hand the call back over to Jenny Johnson, Franklin's President and CEO, for final comments.

Jennifer Johnson

Great. Well, listen, everybody, thank you for participating in today's call. And once again, we're a people business. I'd like to thank our employees for their hard work and dedication. And we look forward to speaking with you again next quarter. Thanks, everybody.

Operator

Thank you. This concludes today's conference call. You may now disconnect.