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Franklin Resources (NYSE:BEN)

Q1 2012 Earnings Call

February 01, 2012 4:30 pm ET

Executives

Gregory Eugene Johnson - Chief Executive Officer, President, and Director

Kenneth Allan Lewis - Chief Financial Officer, Principal Accounting officer and Executive Vice President

Analysts

Michael Carrier - Deutsche Bank AG, Research Division

Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division

Matthew Kelley - Morgan Stanley, Research Division

Cynthia Mayer - BofA Merrill Lynch, Research Division

William R. Katz - Citigroup Inc, Research Division

Craig Siegenthaler - Crédit Suisse AG, Research Division

Jonathan E. Casteleyn - Susquehanna Financial Group, LLLP, Research Division

Kenneth B. Worthington - JP Morgan Chase & Co, Research Division

Chris Spahr - Credit Agricole Securities (NYSE:USA) Inc., Research Division

Michael S. Kim - Sandler O'Neill + Partners, L.P., Research Division

Glenn Schorr - Nomura Securities Co. Ltd., Research Division

Daniel Thomas Fannon - Jefferies & Company, Inc., Research Division

Operator

Good afternoon, and welcome to Franklin Resources Earnings Conference Call for the Quarter ended December 31, 2011. My name is John and I'll be your operator for today's call. Please note that the financial results we be discuss in this conference call are preliminary.

Statements made in this conference call regarding Franklin Resources, Inc. which are not historical facts, are forward-looking statements within the meanings 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 future results expressed or implied by such forward-looking statements. These and other risks, uncertainties and other important factors are described in more detail in Franklin's recent filings with the Securities and Exchange Commission, including in the Risk Factors and MD&A sections of Franklin's most recent Form 10-Q filing. [Operator Instructions] Now I'd like turn the call over to Mr. Greg Johnson. Mr. Johnson, you may begin.

Gregory Eugene Johnson

Thank you, and good afternoon, everyone. Joining me, as always, is our CFO, Ken Lewis. The first quarter had many challenges, but overall there were a number of positives, including investment performance, improving flow trends in many asset classes, operating margin and capital management that we highlighted in our commentary that was made available this morning. Hopefully everyone had a chance to listen to that, as well as take a look at our 10-Q that was also filed this morning. Now I'd like to open it up for your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Michael Carrier from Deutsche Bank.

Michael Carrier - Deutsche Bank AG, Research Division

Your first question, just on the equity side of the business, it looks like the flows in the quarter are probably better than you expected. Yes, I know last quarter you guys had some either redemptions on the institutional side, I think it was maybe $2.7 billion that you pointed out. This quarter you've mentioned, on the prerecorded call, some wins. Just wondering how significant those were because it seems like on the retail side, depending on how big those were, you saw some improvement there. So just trying to figure out what's driving that. And then any -- do you have any product granular, that you could give? I think you mentioned income products, but just any color there.

Gregory Eugene Johnson

I think there was no real significant moves on the institutional side except there was one large account, about $840 million in global equities that was a new mandate during the quarter, and then there were a lot of wins in the $200 million to $300 million range. But really nothing more, I would say, normal as far as wins and losses during the quarter. But nothing really to call out as far as retail trends. I just think there's a lot of noise, quarter-to-quarter, on the institutional side.

Michael Carrier - Deutsche Bank AG, Research Division

Okay. And then just on the global bond side, you guys provided some color on the prerecorded call, just any more color when we look at the U.S. products and the flows versus the non-U.S. And, yes, I think even if we look in the past 2 years, there was a lot coming in the non-U.S. channel, and you guys have mentioned over time where it's not as sticky, and so when you have some volatility in the market, you can see some more outflows there. And then, I think, we've asked the question before in the past on capacity on those products. I just wanted to get your thoughts on -- sometimes there is -- you can have the same strategy, you have different funds. So when you think about some of the concentrations that the fund can take in, say, like emerging markets, have you guys ever considered, or would it make sense, to have a product where you can focus more on some of the smaller markets and then have a product that, just given the size of the fixed income markets, could continue to grow and you probably wouldn't have any capacity issues?

Gregory Eugene Johnson

I think all of that -- we've considered all of that. I'll start with just the flows. And I think as we've called out on prior calls, I think the level of flows coming in to the CCAB and the cross-border funds, we felt that, that was not a sustainable level. And this was the first kind of setback. And also, I think, the other factor is that you do have more control by gatekeepers. And with the increased volatility, they have -- they can slow down a larger portion of your flows versus the U.S., which is more one-on-one out with advisors. And also, I think in the U.S. generally, a smaller portion of an overall portfolio, and in the offshore sales, a lot of newer investors to this category. So what we're seeing and what is consistent with our thinking is that the U.S. was less vulnerable to the downturn and didn't have as much in terms of outflows and is quicker to rebound based on the performance. And I think it is important, it's early for January, but much of the underperformance that we experienced over the last year, we've had a strong rebound in the month of January. So I think that'll help when people see where the fund is priced today. And then on emerging markets bond and capacity, those are all good points. I mean, we came out with emerging markets balanced fund this quarter, which would have more exposure in the smaller markets along with the emerging markets. So capacity is not a constraint right now with sovereign debt and how this fund's been run historically. So we don't think it's an issue with the global bond fund. And I'd also point to the total return fund which continues to grow in terms of flows, which includes corporate's as well.

Operator

Our next question comes from Robert Lee from KBW.

Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division

First, I had a question on margins and maybe it's a little conceptual, but if I look back over the years, you guys have done a really good job of kind of improving the operating efficiency of the business, whether it's through transitioning expenses to lower-cost locations and other things. And how do you think about going forward, do you feel like there's much -- any more or much more opportunity to kind of drive, make kind of the big drives in efficiency that you've kind of get -- were able to gather over the last, really, decade, I guess? Whereas at this point, it's more about top -- if you're going to grow margins, it's really pretty much a top line driven story that's not as much -- beyond just trying to be tight on cost, not a lot of other big move you can make on the infrastructure side?

Kenneth Allan Lewis

Yes, Robert, those are good questions. I think there is capacity in the low cost jurisdictions. We have this campus in Hyderabad, there's capacity there to add more people. We're constantly looking for ways to increase our efficiencies using that. But having said that, it's a hard fight to make a -- to really move the needle on the margins. When you do that, it's more of a long-term effort. So obviously, the big swings in the margin comes from the revenue. But I do think there is room for us to become even more efficient.

Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division

Okay, and maybe as a follow-up for, Greg, you kind of a touched on this in your comments before -- just now, on the control the gatekeepers exert and to what extent do you think there is a risk you kind of become a little bit of a victim of your own success? And what I mean by that is your so well penetrated in distribution in the U.S. and whether it's through the global bond products or maybe mutual shares or others, that you get to a point where certain distributors are just like, "Look, performance is good. We like you, but we kind of have enough exposure." At this point, maybe -- do you feel like you're -- that, that's something you bump into at different places or do you think there's still plenty of runway so to speak?

Gregory Eugene Johnson

Yes. I don't think that's a problem. I think the way the world looks at it or advisors look at asset management is they look for a category and a strong performer that they have a good relationship with. And for us, it's under multiple names with, really, distinct groups. So I don't think you have that kind of concentration risk where they feel like, "Oh, we're -- this is our #1 outside firm, and we need to cut back on that." It's just not an issue. I think people like the global bond. They're going to look at capacity on an individual basis with individual funds. They're not really going to roll it up and see how much they have with the overall firm. So I've never really experienced that as being any kind of a barrier.

Operator

Our next question comes from Matt Kelley from Morgan Stanley.

Matthew Kelley - Morgan Stanley, Research Division

So just curious. Based on what you're seeing in January so far in your conversations with clients, just curious to get your thoughts on the retail side and institutional side, how willing are your clients to re-risk and what do you think are going to be the biggest growth drivers in your products this year?

Gregory Eugene Johnson

Well, one, I mean you've had a pretty significant rebound in the market, but still headwinds with active managers on the equity side that we've seen, I think. So risk, we haven't seen people coming back into the traditional long-only equity mandates, but we have, I think where you see the movement is on the dividend income side, the hybrid income fund. It's clearly still a flight to quality. We saw a movement in our U.S. government fund, muni sales, those are doing very well. But where -- the area I expect to see continued growth is around rising dividends, equity income and the Franklin Income Fund. I think those are the funds that have equity exposure, have a yield better than a money fund yields certainly, and we think offers better risk/reward. And that's really what we're talking about in distribution.

Matthew Kelley - Morgan Stanley, Research Division

And then, I was hoping you could just shed a little bit more light on the response in the U.S., particularly on the discussions you're having with the advisors on the Templeton Global Bond Fund. So just curious, is there more of a skew to the investors who have been with you for a longer period of time, say, 2009, understand it a lot of better? Do you think the ones who -- the people to put money to work with that fund in 2010 and 2011 really understand the long-term strategy as well?

Gregory Eugene Johnson

Yes. That certainly helps. I mean, we are looking at it and trying to understand are there redemptions coming. And certainly, they're a little bit higher with the newer money that haven't really seen the ups and downs over time. And we have had periods of underperformance in the past with this fund, and because this fund is not really run to a benchmark or an index. And to get the kind of returns we've had over time, you do take risk. And you're going to have periods like we had with this unusual flight to quality that can move the needle pretty quickly. But I think what we've seen here in January and we saw it in past years is that the markets will normalize quickly and you can get much of that back. So the longer somebody is in a fund and experiences the ups and downs, the better we are. And I think that's the silver lining to Europe where you have a lot of new investors that came in, and the ones that now stick with the fund understand that it can go up and down that kind of level and it's really not a money fund equivalent. So I think that's the good news, if there is any.

Operator

Our next question comes from Cynthia Mayer from Bank of America.

Cynthia Mayer - BofA Merrill Lynch, Research Division

You mentioned on your commentary you expect expenses to turn a little bit higher this quarter, and specifically, you mentioned comp and merit increases. I was looking back and it looked like last year, I think it was -- forecasted something like $10 million to $20 million in merit increases. And I'm wondering if you're expecting that sort of same range? And also, since you pulled back on variable comp in this quarter, would that then bounce back?

Kenneth Allan Lewis

Right. I think you're right on, on both points. If you do look back to the first quarter of last year versus the second quarter of last year, you could see a -- in percentage terms, you could see an increase, I think, it was about 7% at our 8%. And we have grown the employee base a little bit, so I do think it's reasonable to expect something a little bit higher than that in the next couple of quarters. And of course, on the variable side, if things pick up, you could expect some pressure there as well. The other thing I'd mention also if -- depending on your assumptions for sales is, don't forget about the sales distribution and marketing expense line as well, which typically grows a little bit faster than its revenue counterpart.

Cynthia Mayer - BofA Merrill Lynch, Research Division

Okay. And then also you didn't mention G&A. Is that pretty much a level rate?

Kenneth Allan Lewis

I think that there's a lot of things that go into that line item. Certainly, one of the bigger ones is advertising, and for us seasonally, the first quarter of our fiscal year is pretty low on the advertising front. So in the normal circumstances, I would expect that to go up, but we have been pretty cautious about expense management in this first quarter. I've asked everybody to try to keep underneath even their budgeted levels and they're doing a fantastic job at that. So with that as background, I'm not sure that we would see the normal pickup in advertising in the next quarter. But certainly, there'll be some pressure in the advertising lines that might drive that expense category up.

Operator

Our next question comes from Bill Katz from Citi Group.

William R. Katz - Citigroup Inc, Research Division

Greg, you mentioned on the call, your activities picked up a little bit in January. And so the question is, is that both gross and net sales? And if so, where specifically are you seeing the leverage?

Gregory Eugene Johnson

Well I think anytime you see the market rebound like it has and certainly global bonds settling down, that's going to help the kind of pressure that we were under. As I mentioned before, I mean, the leverage is -- the trends that we saw in the fourth quarter where we saw a pickup in hybrid sales and funds, like the U.S. Government Fund, had very significant net inflows. And I think that, that trend, along with municipal, should continue. So that's where I would expect to see the biggest move. And then obviously, the global bond side, the net outflow pressure should be a lot less.

William R. Katz - Citigroup Inc, Research Division

Helpful. And second question is, I think I asked [indiscernible] I apologize. But a number of platforms are out there for sale, you're sitting on a ton of cash, great free cash flow. What's your appetite for deals in this environment? And if so, what kind of products or geographies might be of interest?

Kenneth Allan Lewis

Yes, it's -- we do get this question quite often. And the answer is there is really -- we don't kind of limit the universe. And small deals, certainly we've done small deals in targeted areas to bolster our local asset management capabilities. On balance, I'd say that probably appeals to more than a megadeal, but we certainly wouldn't rule out a big acquisition if we thought that there is substantial synergies to be had by doing that.

Operator

Our next question comes from Craig Siegenthaler from Credit Suisse.

Craig Siegenthaler - Crédit Suisse AG, Research Division

Craig Siegenthaler, Credit Suisse. First question just on the other revenue item. I'm just wondering, or if you could help us think about this in terms of run rate, because the reclassification impacted it, lifted a little higher. Is $27 million a good run rate to think about for next quarter? Or is there anything we should be backing out?

Kenneth Allan Lewis

Yes. Because we have limited historical data, it's a little tough to say. But certainly, I feel comfortable saying it's going to be higher than it has been in the last 4 quarters whether it'd be as high as it is now, I can't really say at this point.

Craig Siegenthaler - Crédit Suisse AG, Research Division

Okay. And then, just another question. There's a few data points I was wondering if you could help us in terms of thinking about flows this quarter, but I'm sure you've probably seen some of the data. So I'm wondering if you have any commentary in terms of how sales have trended as of the first month or the first quarter or overall sales or maybe Templeton Global Bond Fund flows specifically or even aggregate flows, like any data in that type of category that let us think about kind of flows quarter-over-quarter?

Gregory Eugene Johnson

Yes. I can't really add much to what I mentioned earlier. I mean, the markets are stronger things have stabilized and we expect a much better quarter. But it's a little bit early and I wouldn't want to lead anybody to some numbers one month in.

Craig Siegenthaler - Crédit Suisse AG, Research Division

Then, Ken, just one question on the Auto business. I believe you said no impact. But when we think about the forward run rate of earnings after you sell the business, is that also -- is that basically also very little impact?

Kenneth Allan Lewis

Yes. It's going to have very little impact because essentially we have a been running that book down. It's becoming a less significant part of the business over -- since 2008. So I wouldn't say no impact, but it wouldn't be significant.

Operator

Our next question comes from Jonathan Casteleyn from Susquehanna.

Jonathan E. Casteleyn - Susquehanna Financial Group, LLLP, Research Division

You mentioned active equity mandates still not recovering despite the uptick in the market. So I'm just wondering, in your view, what's the catalyst for the improvements in equity mutual funds on the active side?

Gregory Eugene Johnson

Well, I mean, I think that's a good question, it probably just comes to the type of risks that people are taking. And just looking at the overall portfolio, I think most of the active side you're kind of seeing through the target date funds that are flowing through 401(k). But individuals, and I've said this in past calls, probably had an overweighting to U.S. equities and continue to bring that number down, and that's put a lot of pressure on active. It's not certainly the movement towards passive, which is a small percentage, but not the conclusions that people have when they see the big flows in the passive and inactive. I think it's a more rebalancing of their own and that includes alternatives, commodities, other type of strategies in their overall portfolio. So I think it's going -- it's still -- its headwind for the industry, but we're going to continue to pound that message into our -- on the distribution side because, again, we think, risk/reward, it's a better place to be than fixed income at this point.

Jonathan E. Casteleyn - Susquehanna Financial Group, LLLP, Research Division

And any sort of ballpark timing? I mean, you've seen many cycles before, so just wondering, do you think this is an '12 item or it's more longer data than that until you see the...

Gregory Eugene Johnson

Well, I hope so, but it's taken longer than I thought it would. So, again, I think the you can see some real movement on the equity income side, and I know there is a lot of advisors now that are looking at that and even looking at -- as a substitute for some short-term cash, that it may be a better place to park money than even holding it in a money fund they have or certainly in -- on bond funds.

Jonathan E. Casteleyn - Susquehanna Financial Group, LLLP, Research Division

Okay. Great. And then quickly to the Templeton equity side, one, your numbers still quite weak. I'm just wondering can you -- do you have any color on the underlying exposures there, just so we can understand how they're trending during the course of '12 here on a go-forward basis?

Gregory Eugene Johnson

Yes. I think the 1-year number is about average because the growth fund is 55% out, foreign funds 51 percentile, so they have had exposure to financials in the Eurozone, and that's been a little bit of a lag, but maybe a little bit of a help more recently. So it -- that could move on, really, on a daily basis into the top 2 quartiles.

Operator

Your next question comes from Ken Worthington from JPMorgan.

Kenneth B. Worthington - JP Morgan Chase & Co, Research Division

Follow up on the auto lending business. Wanted to hear a little bit more about the, maybe, benefits of unwinding that business. Does that change kind of the bank holding company status? Does it free capital? Are there other ancillary benefits outside the P&L that are worth highlighting?

Kenneth Allan Lewis

No, not really. It was treated as a standalone business. It was certainly part of the banking segment, but it was treated as a standalone business. And the decision to wind it down was just a cost benefit for that business. It doesn't really impact the bank holding company status.

Kenneth B. Worthington - JP Morgan Chase & Co, Research Division

Okay. Is there a reason to keep that holding company status if you don't have the auto lending business?

Kenneth Allan Lewis

Well, it's really the reason we're a bank holding company is for the high net worth business -- custody business and lending in that area.

Kenneth B. Worthington - JP Morgan Chase & Co, Research Division

Okay. And then on investment income, can you give us some just better details on the results this quarter? What was realized versus unrealized? And then, in what part of the investment portfolio did you see the majority of the gains if it actually came from one part or the other?

Kenneth Allan Lewis

I'll try to give you a little help with that. So thinking about in the presentation that sharpest of the different components, I mean, I think there is probably 2 ways you could look at this, if you're trying to model it. There is kind of a back-of-the-envelope way, which says, "Okay, look at the investments in cash that the company has legal ownership to", and in our slide we show that, that generated $55.6 million. And then you could say, "Look at the things that we don't have ownership to", and in our slide, net of the noncontrolling interest, it's really almost nothing. So the majority of the net-net, bottom-line impact was for things that we owned and then we've kind of broken it out in the different categories. The trading investments category, it was the bit that's unrealized. The available-for-sale, most of that would be realized. So that's kind of the back-of-the-envelope way.

Then, another way you could look at it is looking at the underlying securities and we've put a disclosure, I think, it's on Page 42 of the Q, that lists about $1 billion of trading securities by investment objectives and those are the ones they get to mark-to-market. In addition to that, we note there is about $800 million of noncurrent investments that get driven by the market, and we show what categories those are in, and that drives the equity method investment bar on Slide 17. In addition to that, we have $1 billion of VIEs and most of the variable interest entities are collateralized loan obligation. So what you're seeing in the P&L there is the changes in the net asset liability position of those products. I hope that's helpful.

Operator

Your next question comes from Chris Spahr from CLSA.

Chris Spahr - Credit Agricole Securities (USA) Inc., Research Division

Actually all my questions have been answered.

Operator

Our next question comes from Michael Kim from Sandler O'Neill.

Michael S. Kim - Sandler O'Neill + Partners, L.P., Research Division

First, now that flows into the Global Bond Fund have slowed a bit, do you have a sense of how much the redemptions you're maybe recapturing into other products, similar to what you were able to do when you had some muni fund redemption pressures earlier last year?

Gregory Eugene Johnson

Yes, I don't have those numbers in front of me. I did see fairly significant exchange activity into our government fund, which would -- I think would be a normal place for that to go. But I don't know how much we're capturing off hand.

Michael S. Kim - Sandler O'Neill + Partners, L.P., Research Division

Okay. And then, maybe a question for Ken. Just given the recent step-up in dividends and share repurchases, has your thinking changed at all as it relates to the payout ratio? I think previously you've talked about maybe a 60% payout range, but maybe are you a bit more willing to stay above that level just given the strength of the balance sheet?

Kenneth Allan Lewis

I think we're probably going to consistently stay with that target for now. And keep in mind that all of those create shareholder returns in terms of dividends and share buybacks come from the U.S. cash, so it's not the entire balance sheet. So I think we're going to continue with the targets that we've set in the past.

Operator

Our next question comes from Bill Katz from Citi Group.

William R. Katz - Citigroup Inc, Research Division

Just 2 of them, I may have the numbers wrong from memory, but I think in your prepared remarks this morning, you mentioned that the yield launch program, you're saying, mailed out like 20,000 fulfillment kits, if you will. How does the -- how long has that been going on? And how does that beginning compared to what you do with maybe, Vision 2020 (sic) [2020 Vision] or even fixed income back several years ago as well?

Gregory Eugene Johnson

Yes. I think it's a complement to the 2020, and really the equity story and just specializing in a category that today with yields at historic lows, certainly 10-year historic lows, that we feel it's a compelling story to focus. So the literature was just mailed out, I think, just over this last quarter, it's a new campaign that just kicked off and will be ongoing throughout the year. Bill, did that answer your question?

William R. Katz - Citigroup Inc, Research Division

Close enough [indiscernible]. The other question is just in terms -- coming back to Ken's commentary about other income. I just want to make sure I understand the step up though, is there an equal offset in the noncontrolling lines? There's really no net economic impact regardless of the new revenue line?

Kenneth Allan Lewis

So to the end -- okay, so back to Slide 17, I think we've even color-coded it, kind of the areas above the purple, which is $7 million, most of that is offset by noncontrolling interest. Not the entire category just the things that we consolidate.

Operator

You're next question comes from Robert Lee from KBW.

Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division

Just curious, in the prepared remarks, Greg, I think you mentioned that, and you've talked about this in past calls, launching some multi-asset class products and some alternative products. And just a couple, really, 1 or 2 questions at this, number one, is there anything within that mix, I know it's early days, but that when you look at and given your distribution capabilities that you think, kind of you're particularly excited about, that you think could be, I'm not going to say another global bond product, but something you think can be a good driver of flows over the next couple of years? And then on the alternative front, are those mainly kind of retail-type products? Or have you actually started kind of launching more alternative strategies for institutional investors?

Gregory Eugene Johnson

Well, I think the multi-asset fund is just natural for us to have that with all the capabilities that we have. And as I've said before, I think it's important that you have that commodity exposure. And then the other one that we just launched this quarter, the real return, real asset fund. And in this environment, I don't expect it to move but it's very important to have that fund in there if rates do start to back up at some point to capture exchanges and have a fund that's designed to beat inflation over time. So that's a big risk to the company. And so having that in the lineup but then can be invisible will be important for us. But I think in the near term, the multi-asset fund is the one that we think has the shorter term opportunity. And then what was the other question?

Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division

It was just on the alternatives, all types of...

Gregory Eugene Johnson

Alternatives. Yes, I think, probably more on the institutional side, but you could argue that some of these funds are a little bit more alternative because they do have the commodities in them and futures in them and a different type of exposure than our traditional loan-only, and as well as currency forwards and things like that.

Operator

Our next question comes from Glenn Schorr from Nomura.

Glenn Schorr - Nomura Securities Co. Ltd., Research Division

Just one follow-up question on the global bond. I'm curious, when you -- it wasn't a big pickup in redemption, it's a small pickup in redemption. So it's really a gross sales follow up. And so, you had like, literally, 3x or 4x the falloff in gross sales than you did in the U.S. products. So I'm curious if you -- how you might attribute it? What kind of feedback you got from the sellers, if you will, of -- is it a performance or was it a performance issue? Was it people freaked out on Europe issue? And what is it about that customer base that is that much more active in quarter-to-quarter than the rest of your clientele?

Gregory Eugene Johnson

Well, I think it's all of the above. I mean it is -- in Europe, there are little bit -- it's a heightened concern, I think, over what was going on at the time. There were rumors around the fund at that time. I mean, I could contribute. And I think some gatekeepers may have been worried that they had too much concentration in there in certain cases. So all of that adds up to a slowdown. How quickly it can come back? I think that's the question that we're all -- we're hopeful that the January rebound will accelerate that. But clearly, it's moving in the right direction in the U.S. It's going to be a little slower with the cross-border sales.

Operator

Our next question comes from Dan Fannon from Jefferies & Company.

Daniel Thomas Fannon - Jefferies & Company, Inc., Research Division

Following up on that a bit. Just -- you guys have highlighted regionally areas of strength for sales. I think Italy, you mentioned that at least a few quarters ago. Maybe if you could talk about areas of strength and also the regions where there was potentially a pickup in redemptions or where you saw the most weakness?

Gregory Eugene Johnson

Yes, I don't really have any trends to call out other than obviously, Italy, which majority of that was global bonds. So you wouldn't have -- you'd obviously see a big drop from where it was as far as flows. I think it is important to point to the other big driver in cross-border, which is the Asian growth fund, which had a tough quarter last quarter but had good relative performance. And as we would expect in that fund, it's a much quicker rebound in sales and that's consistent with those markets coming back. So we have seen a pickup there. And so, any of the markets that were selling more equities, more Asian growth, more U.S. opportunities, they have rebounded a lot faster than the ones that were concentrated more on the global bond. And really Italy, is probably the only one market that had the significant concentration on the Global Bond Fund.

Operator

We have no further questions at this time.

Gregory Eugene Johnson

Okay, well, thank you, everyone, for participating on the call. And we look forward to speaking next quarter. Thank you.

Operator

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.

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