Franklin Templeton posts quarterly loss on hit from Western Asset unit

(Reuters) – Investment manager Franklin Resources (NYSE:BEN), better known as Franklin Templeton, swung to a fourth-quarter loss on Monday as a $389.2 million impairment charge related to its Western Asset Management unit overshadowed its higher management fees.

WHY IT’S IMPORTANT

The unit, which chiefly manages fixed income portfolios, has been under investigation by the U.S. Securities and Exchange Commission over certain trade allocations related to treasury derivatives.

Western Asset had said in August its co-chief investment officer, Ken Leech, received a Wells Notice from the SEC and was on a leave of absence.

A Wells notice is issued when the SEC is planning to bring enforcement action, but it does not necessarily mean the company has engaged in wrongdoing.

BY THE NUMBERS

Franklin Templeton said the $389.2 million impairment charge was tied to certain mutual fund contracts managed by Western Asset.

However, the company’s total investment management fees, which is the largest contributor to Franklin Templeton’s total operating revenue, grew 8% to $1.77 billion in the fourth quarter from a year ago.

It reported a loss of $84.7 million, or 19 cents per share, for the three months ended Sept. 30, compared with a profit of $295.5 million, or 58 cents, a year earlier.

Excluding one-time costs, Franklin Templeton’s quarterly profit fell 3% to $315.2 million.