Welcome to Franklin Resources Earnings Conference Call for the Quarter Ended September 30, 2023. Hello, my name is Julie and I will 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.

Good morning and thank you for joining us today to discuss our quarterly and fiscal year results. Please note that the financial results to be presented in this commentary are preliminary. Statements made on this conference call regarding Franklin Resources, Inc. which are not historical facts, are forward-looking statements within 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 described in more detail in Franklin's recent filings with the Securities and Exchange Commission, including in the Risk Factors and the MD&A section, of Franklin's most recent Form 10-K and 10-Q filings. With that, I'll turn the call over to Jenny Johnson, our President and Chief Executive Officer.

Thank you, Selene. Hello, everyone and thank you for joining us today to discuss Franklin Templeton's fourth quarter and fiscal year 2023 results. As usual, Matt Nicholls, our CFO and COO and Adam Spector, our Head of Global Distribution, are joining me on the call. Over the past several years, we've made great strides in transforming our business, all in an effort to meet the needs of our clients and shareholders around the globe no matter the market environment. We've done this by creating a diversified company that offers a broad range of investment expertise and capabilities across asset classes, investment vehicles and geographies. Today, we're able to offer our partners and investors the ability to fulfill their comprehensive investment needs across public and private markets and in the vehicle of their choice as one firm with specialist investment managers operating around the globe. In addition, we have made important investments in value-added services, including technology, digital wealth and customization in order to be on the forefront of innovation in areas increasingly important to our clients. As we look back over our fiscal year, challenging global financial markets and geopolitical uncertainty weighed heavily on investor sentiment. The so-called Magnificent Seven, 7 large U.S. tech companies, have primarily driven all of the gains in global stocks this year. And in our fourth quarter, we saw heightened volatility lead to increasing pressures and declines across equity and fixed income markets. We believe markets, like the one we're in, reinforce the value of active management with a long-term investment horizon. So often in these times of uncertainty, where the best opportunities to capture value are identified. In this complex and volatile market environment, it's no surprise that there's a tremendous amount of cash sitting in bank accounts and in money market funds, capturing…

Thanks, Jenny. Fourth quarter earning AUM was $1.37 trillion, reflecting a decline of 4% from the prior quarter and average AUM was $1.42 trillion, flat from the prior quarter. Adjusted operating revenues increased by 1% to $1.6 billion from the prior quarter and included adjusted performance fees of $98 million compared to $116 million in the prior quarter. This quarter's investment management fees benefited from $36 million in connection with Fondul and were partially offset by lower catch-up fees of $17 million in secondary private equity. This quarter's adjusted effective fee rate which excludes performance fees, was 40.2 basis points, an increase of 1 basis point due to transaction-related management fees earned from Fondul. Adjusted operating income increased 7% from the prior quarter to $512 million and adjusted operating margin increased to 32.4% from 30.5%. The increase from the prior quarter is primarily due to higher investment management fees, the aforementioned management fees earned from Fondul and lower compensation and benefits expense, partially offset by lower performance fees. The specific operating income from Fondul and secondary private equity catch-up fees was $35 million for the quarter. Fourth quarter adjusted net income and adjusted diluted earnings per share increased by 31% and 33% from the prior quarter to $427 million and $0.84, respectively. The increase in adjusted net income and adjusted diluted EPS is primarily due to higher other income, higher adjusted operating income for the reasons mentioned and lower taxes. Adjusted EPS increased by $0.05 due to Fondul and secondary private equity catch-up fees in the quarter. Turning to fiscal year 2023 results; ending AUM increased by 6% from the prior year, while average AUM declined by 5%. Adjusted operating revenues of $6.1 billion decreased by 6% from the prior year and included an additional 6 months of Lexington and…

[Operator Instructions] Your first question comes from Michael Cyprys from Morgan Stanley.

Maybe you could just start off on the private market space. You guys continue to raise capital there. Maybe you could just update us on some of the progress across some of the key flagship funds which strategies you think might be entering the market as you look out over the next 12 months. And just on the private wealth channel, I think you mentioned 20% in terms of what you're looking -- expecting to raise or maybe you could just talk about some of the traction that you're seeing in the private wealth channel, in terms of fund placements and new products you might be able to bring on the channel.

Right? Adam? Adam is going to take this one.

All right. Thank you, Jenny. We're seeing strength really across the board. I would say the folks -- the place where we're seeing a lot of interest is -- like others is in the private debt area. They're particularly in the real estate-related debt. We're seeing good growth. We've had a good year in our CLO business. We're out with special situations and new BSP flagship fund, that's all really good. Alcentra is beginning to be integrated more into our distribution force. We're feeling really positive about that as well. Lexington is continuing their fund raiser for Fund 10 and we're just beginning to do some other things there. You mentioned, Michael, the 20% raise that will come from wealth management for Lexington. We're starting to see greater traction for wealth management alternatives across the board. We spent the year really building out our capabilities for U.S. wealth management alternatives and we're now taking that model and using it in Europe. In general, one of the things we're seeing that's quite positive in wealth management alts is the fact that we're now getting on to calendars of 6 month, a year in advance. And once you're in that flow, we think the fundraising really will continue. That's the quick overview.

Great. And just a follow-up question, maybe for Matt. I think in the release, you mentioned the transfer agency functions globally have now been outsourced. You did that in the U.S., now you took that around the world. I think also you've outsourced fund administration in the U.S. So maybe you could just talk to what's next as you think of about simplifying the business, enhancing efficiencies, what steps might be able to take over the next year or 2? How meaningful might they be? And just curious, any sort of benefits or lessons learned and takeaways that you could speak to on the transfer agency outsourcing.

Yes. So you mentioned 3 key things there. One is the steps we've taken to outsource fund administration, transfer agency and aspects of our technology. What we've been working hard on over the last year or so is what next in terms of our investment management platform in terms of technology. That includes both middle office and back-office functions. And I'd say that we're pretty deep into it and you can expect more updates from us throughout 2024.

Well and I would just add, Mike, as you know, we've done a lot of acquisitions. And I think one of the reasons they work well is, we take our time on some of the integration. And so there's opportunity, obviously, we'll be integrating Putnam into the -- into our environment. And even some of the Legg Mason SIMs are -- have an opportunity to integrate which we think will simplify the environment.

Yes. And in terms of the financial impact, Mike, I would just caution you on that. These things take time. As Jenny mentioned, there won't be any additional change in 2024. That's a step change in terms of our expense, in terms of our expenses around the operation. But I think going into '25, '26 or longer term, not only do we have the opportunity to be more efficient across the organization, bringing things closer together in an effective way but also, it's an opportunity to modernize, to reduce CapEx, to make sure that longer term, we're in a position where we can scale at lower expenses with the right partners.

Your next question comes from Craig Siegenthaler from Bank of America.

My question is on the SMA business. And I think you said, ask one question but maybe I could tuck another one in on the SMA within here. But -- what I'm looking for is more details around the components and the growth trajectory. So now that the Franklin Income Fund which is one of your flagship is in the SMA wrapper, I'm just wondering, are there other flagships at Franklin and its affiliates that would make sense also launching into an SMA wrapper? And then -- kind of my 2-parter was, you're generating about $700 million of flows per quarter in the SMA wrapper. Do you think this is a level that could increase significantly from here?

Yes. So I mean, you've got to remember, SMAs exist and the reason we're taking off so much is that in the retail channel, where the world went fee-based, it is difficult for a financial adviser whose client fees, they're being charged every month for advice to buy and hold a mutual fund, right? So if you can deliver the same kind of product in an SMA with the holdings basically on the statement, it looks like the advisers being much more active on that. And so we view ourselves as being vehicle agnostic to how we deliver what is our expertise which is our investment capability. And -- so you take, for example, the Franklin Income Fund. The Franklin Income Fund now is -- we have an ETF version, an SMA version and we're seeing growth in both of those. So any of our products can be delivered in SMA. Today, we have munis. Munis are actually -- have a good growth area in the SMA muni ladders. And so the way we are thinking about our business is, I always say it's like a 3-legged stool. It's product capability, geo-global distribution and vehicles. And the vehicles can be mutual funds, communal trusts, ETFs, SMAs, things like Canvas direct indexing. And we should be flexible about how we deliver those, in whatever market we -- whatever market we're operating in. And I think that nobody has won the breadth of product capability that we have to the breadth of geographic distribution, both on the retail and institutional side. And while we may have been late to things like passive ETFs, we were early actually in the active ETF space. And so being vehicle-agnostic is very important. Now the challenge is on the SMAs, is that you have to get approval at the gatekeeper level and then you have to go out and train individual advisers. So it's a bit like alts in the complexity. But once you do that, then you just get consistent flows coming in. So the long answer is basically, we see any of our flagship funds as being able to be delivered through the SMAs platform.

And I just might add that emerging markets is another area where we're seeing significant SMA growth in addition to the munis that Jenny answered. And while a lot of the growth is in SMAs, having a product available like the income fund in SMA, in ETF, a mutual fund across border fund being vehicle-agnostic, really, that just take broader access to different platforms.

Your next question comes from Brennan Hawken from UBS.

Curious about the expectations for expense growth into next year, Matthew. Maybe if you could give us an update there.

Sure. Thank you, Brennan. So I'll split it into 3 components, if you'll bear with me. One is, we'll discuss the first quarter guide, our fiscal first quarter guide. Second, I'll give a very preliminary, recognizing how early we are for fiscal year 2024. And then thirdly, I will provide an update on Putnam, because obviously, Putnam, we expect to become an important part of our consolidated guide, if you will. But I want to do that separately because we don't know exactly when it's going to close, so it's speculative at this point but I'll give you that information. And then I'm going to go through the individual components of the expense issues that you focus on, from a modeling perspective. And so firstly, EFR, we expect our EFR to remain in a 39 basis point area, excluding performance fees. Compensation and benefits, we expect -- again, this is first quarter '24 fiscal, we expect compensations and benefits to be at $750 million but please note that this includes $35 million of accelerated deferred comp charges. This also assumes $50 million of performance fees. IS&T, we guided to $125 million, flat to the quarter we just had. Occupancy, we expect that to increase to $65 million from high 50s. And the reason for this is that in New York City, we are transitioning to a more efficient and unified space. We have 9 offices currently in New York City and we are consolidating into 1 major office space in New York. And for a period of about a year, we're going to have the equivalent of double rent on that office. So that means, for the first quarter, this implies 2 months of this, by the way, it's about an $8 million increase; and that $8 million will increase…

Got it. I got my money's worth on that question. Thank you, Matt.

That's pretty thorough.

Just one clarifying question. So -- and you gave us the -- I think you kind of gave us that $150 million incremental run rate by 9/30 which kind of is a guiding -- sort of a north star. But I believe the walk was, it's like $8 million to $10 million in the first quarter, assuming ending December...

First month.

That's just 1 month, right?

Yes, just 1 month.

And then next quarter, that means we're adding $25 million on to that $8 million to $10 million. So getting to $35 million. And then -- and are those -- okay, got it. And those are quarterly, not run rate?

Correct. They're actual adds. So by the end of that period, we would have added $25 million at the end of the third and fourth quarter, we would have added another $25 million to $30 million. So at the end of the fiscal year, we would have added up to about $100 million. So it's real actually -- operating income addition is not just run rated. And the reason why I add the $150 million run rate is that, that could be achieved -- sort of an accelerated fashion right at the end of the last fiscal quarter.

Okay, perfect. That's really, really helpful.

Yes. The only other one thing I'd add is that the -- because this is obviously a very important factor in the model as well, as you think about overall AUM and EFR. The Putnam acquisition reduces -- is expected to reduce our EFR by 0.2 basis points because they have a slightly lower EFR than us.

Got it. And that is -- and when would the impact of the EFR would that happen pretty much right away?

It's over the years. So -- but yes, I pretty much do -- gradually it comes in because -- but it should be right away in December.

The run rate impact by the way, it will be adjusted for the timing?

Yes. Because as you know, we average -- the AUM gets averaged over the period, it comes in. So it's going to be a bit wonky in the first year -- the first quarter, sorry but you'll soon see the full impact of 0.2.

Got it. But the 0.2 is the way we can think about it and then we can adjust for timing accordingly.

Exactly, that's a good way of putting it.

Your next question comes from Alex Blostein from Goldman Sachs.

Great. Well, thanks for that. I think we could probably end the call right there. So I did want to ask you guys about fixed income, obviously. And look, Western had some nice stabilization in investment performance early in the year. But the latest moves in interest rates put incremental pressure on core and core plus both, absolute and relative to the benchmark. So how are the conversations with clients, I guess, evolving as you highlighted, the opportunity to maybe rotate some of the cash on the sidelines to longer duration products. How big of a headwind do you think that is? And if more capital ultimately chooses to go back to passive vehicles within fixed income like we've seen this year, how is Franklin as a whole, positioned to maybe take advantage of that opportunity in some of the fixed income refers on the passive side?

So interest -- so first of all, core is in positive flows and has remained in positive flows. It's core plus that's been more challenged. We just came from -- we had our international institutional client conference last week. And the walk of the discussion is around, is it time to move cash and go longer duration. So we're also waiting for that moment but we're certainly getting close to it. I think everybody agrees, maybe there's one more increase of the Fed, maybe not but we're definitely near the end. And then the question goes, is it higher for longer? Or do things degrade quickly and rates get dropped. So I think we're fortunate in that we have 4 independent fixed income teams that all actually have slightly different views. And clients align with one of those views. And that's the way we look at managing the business and kind of the insurance policy around it which is to have comfort that we know that we can align something. And the key has been training our sales force to understand those nuances. So that they can be out there and deliver the appropriate product consistent with that client's view. And so yes, there are -- I mean I think Western is probably our top-flowing SIM as far as gross sales, because there are a lot of clients that align with Western view. So -- and we think we're well positioned when they're -- sure, there's going to be X percentage that do passive but there's plenty of them that believe in active fixed income. I'm always one of those that's skeptical when you -- the concept of doing capital allocation based on who's got more debt in the fixed income. So passive fixed income is always a question in my mind but there are clients who prefer that but there are plenty of clients who prefer active fixed income. And with our diverse SIMs, I think we're well positioned to capture that as money moves out of cash into longer duration. Adam, do you want to add anything or?

Yes. I think you hit a lot of the key points, Jenny. Western is having very good conversations with its clients. It continues to be Franklin Templeton's top selling SIM in terms of our gross flows. And if you look at their performance, 88% of their marketed composites have outperformed over the 1-year period. And I think that number, the 10-year period is something like 97%. So yes, in core plus and some other strategies, they've had a tough go of it recently but we see that turning around and we see client interest still being very strong in Western products.

Great, that's helpful. And then, Matt, just one for you. Share repurchase is pretty strong in the quarter. I think in your prepared remarks, you alluded to the idea that you might be a little bit more opportunistic. So I was hoping you could maybe flesh that out a little bit more as we're thinking about capital return priorities for next year.

Right. Sure. Thank you, Alex. So I think the point we're trying to make on this is that, obviously, that the market is complicated, it's fraught with uncertainty. So we want to be careful of how we describe this. But obviously, we've been very active in acquiring companies to make sure we have the right set of investment management capabilities to be as relevant as we possibly can to the most important clients around the world in every asset class and every vehicle that Jenny mentioned. We feel like we're pretty much done in that regard. There's 1 or 2 areas that we've referenced, infrastructure, for example, in the private markets area of alternative assets. And then maybe there's a few distribution things, a couple of technology things. But in terms of large-scale transactions involving hundreds of millions, in certain cases, billions of dollars, we feel like we're done in that regard for the foreseeable future. Never say never but we certainly feel that we're done in terms of strategic planning. And therefore, I think you can expect us to move into more of a capital return mode opportunistically. So what that means is we're going to absolutely protect our dividends, as we've always described and you can expect the same sort of pattern that you've seen since -- in the 1980s. We're going to be very disciplined in buying back our -- and hedging our employee grants. But as you know, we're left over with a fair amount of cash after that, both in terms of earnings -- from earnings but also in terms of our balance sheet and look, with our shares trading where they are, it's a very good opportunity for us. And as you know, we've funded 90% of Putnam transaction with shares and we'd like to repurchase those shares as soon as we can. So we're going to be quite focused on that. We don't want to give a schedule because the market is too uncertain in our opinion and we need to make sure that we are conservative and careful and methodical and all the rest of it that you expect from us. But the pattern of share repurchase that you saw in this last quarter, again, I'm not saying it's going to be the same number but you can expect us to really focus on opportunistic share repurchases in addition to the share employee grants for the reasons that I've just outlined.

Your next question comes from Glenn Schorr from Evercore.

I'm not sure if it's for Adam, for anybody. But so the new DOL rule proposal just came out. And I think this is a long time coming. The focus is updating the definition of what is the fiduciary and investment advice. And given your distribution efforts and prowess in the channel, just curious how you think it may or may not impact Franklin in the various products, various channels.

You know, this -- Glenn, this has been discussed for quite a while and back and forth. And we've all and through the ICI, have had opinions on it. And our view is, it's about education, it's about suitability of products and making sure that advisers are deploying the appropriate product for that client. And we've always had the view that it's our job to make sure that we well inform our distribution partners and provide transparency around that. And so I think our view is that this is not going to have a tremendous impact.

Good news. Maybe one follow-up. I appreciate that we're not quite at the finish line yet on Putnam. But as you get to know each other, from my look, I think performance looks good and improving in their products. But as you've gotten closer together, I'm curious what things you're learning, what can you work on for their distribution reach and insurance and retirement?

Well, I think I'll start and then, Adam, you could jump in. I mean, to be honest, like, one of the things that -- we are really excited about this Putnam deal is that, if you're a traditional asset manager, who has a big book of mutual funds, the area from a -- where mutual funds tax disadvantage isn't an issue is in the retirement channel. And so -- and that's a way in which we have always underpunched our weight. And so as we got into this, we couldn't be more excited about combining what we've been putting an emphasis internally, on retirement, with their distribution capability, we worry a lot because as you can imagine, Empower was built out of Putnam. And so really understanding that retirement channel, bringing these teams together and we think that's just going to make us a much, much better distribution partner, not just with Empower but with firms like -- platforms like Principal, Nationwide, Fidelity and being able to have an entry with our stable value in the target date funds. So we look at this and couldn't be more excited about what we think is a great growth opportunity for us in a channel that just even when markets are volatile, people still continue to contribute to their 401(k) through their paycheck. Adam, do you want to add anything to that?

Yes. I would say that in some ways, it reminds me of the Legg Mason transaction when the 2 distribution forces were just so complementary. And if you look at the way that Franklin is built out in the non-U.S. market, as an example, I think that scale there really helps Putnam. If you look at what Franklin Templeton has in terms of SMA capability, ETF capability, that, along with the core Putnam strategy is a real advantage. And finally, I would note that subject to all of the financial comments that Matthew made within those structures, we will be able to add significantly to the sales force. So we'll have a bigger sales force, a more effective sales force by bringing the 2 firms together. That bigger sales force will obviously have more product -- great Putnam product. And so we're feeling that the transaction is really going to help propel us.

And I'll just add on the insurance side, I actually think we gained insurance expertise at the acquisition of Western who has tremendous penetration in the insurance channel. But what's exciting is, now with the alternatives capabilities that we're adding, we can take that expertise and just be a much more relevant partner. And so, as Great-West looked at our capabilities and basically committed $25 billion, it was because it was a detailed bottoms-up analysis of our various SIMs to determine what made sense for them. And that -- we wouldn't have been able to respond to that as well. Had we not had the expertise at Western and we're building it within Franklin and then, of course, the Venerable announcement that we -- the press release we had, I think, last week or the week before, again, comes out of that combined Franklin and Western insurance ideas. So we think there's more to come there as well.

Your next question comes from Dan Fannon from Jefferies.

Another clarification on expenses here. Just -- Matt, your comments on fiscal '24 being flat ex performance fees. I just -- is that versus the reported number in fiscal '23? Or is that ex performance fee comp and other things in it as well?

It's ex-performance fees and other comps. So you have to look at the 2 adjusted numbers in that regard. So it's '23...

So what is the number for '23?

So '23 would be like 4.07 [ph] -- something like that, 4.075 [ph]. And then again, if you -- the full year '24 is really right on that number. Again, excluding the performance fees and the real estate issue that -- the transition I mentioned in New York which is about -- that overall transition is about $50 million or something like that.

Okay. And then as a follow-up, just on alternatives. It looks like gross sales were their lowest levels since, like 8 or so quarters. I'm curious if that's just more the environment, timing around what's in the market with you guys? And then also, just specifically, what did Clarion do in the quarter as well as, if Lexington -- the peers that you are looking -- that hasn't had its final close and when you think that might happen?

So Lexington's final close will be in December. So they're scheduled on that. Clarion has had improving redemption queues but they're still -- I don't know, Adam, if you want to -- if you have the details on it. But we've had all 3 strategies were positive for the quarter.

Yes. And I think, Jenny, in there, there's a difference between the -- what we see in alternatives versus private market alternatives because the private markets generally were a little stronger than alternatives overall as we saw some outflows in the liquid alts strategy.

And your next question comes from Ken Worthington from JPMorgan.

So I guess, beating the drum on expenses. So just when looking at adjusted comp for the quarter was better than guidance when accounting for the bigger-than-expected performance fees. What drove this? Was there a lower payout on performance fees this quarter? Or was the core compensation number lower than your prior guidance? And what sort of drove that?

Yes. So obviously, you've seen the state of the current markets, Ken, resulted in just lower variable compensation, number one. So that's a combination of AUM revenue, less performance, our performance actually improved a little bit. So -- but just generally speaking, that lowered the compensation. Then we had the transaction-related fee that we mentioned on Fondul that has a higher margin associated with it. So that also helped in that regard. So that's probably lower than you would expect. So I'd say just a combination of just expense discipline around how we manage our compensation going in because remember, this is our year-end. So we've made final adjustments based on where the current market is and expect the next quarter to be.

Okay, fair enough. I'm going to take a flyer in Precidian. Your ETF business is doing well. You have additional fund launches. We're seeing more active ETFs industry-wide. Can you talk about Precidian, to what extent is active ETF proliferation utilizing the Precidian structure?

Look, I think the market has kind of spoken on this topic which is they want transparent active ETFs. And so that's been our area of focus. And so we haven't really pursued anything there and I don't think there's a lot of growth there.

Your next question comes from Patrick Davitt from Autonomous Research.

Just one, I've been asked. One quick follow-up on Putnam. Could you give us an update on, obviously, we can see the mutual funds but could you give us an update on how the flows have tracked in the September quarter versus the last quarter and maybe last year in this quarter.

Yes. Patrick, I don't mean to be difficult in any way but obviously, we don't own Putnam today. So we're not -- we can't really report their flows to you. I would just say though, their AUM is roughly where we announced the transaction. So I think when we announced the transaction, we were around $136 billion. And during that period of time, their performance has remained very strong. And you know what's happened with the market between now and between then which was late May and now, the market went up for a month or so or a couple of months, then it came down quite hard. And they're roughly where they are and the flow expectations we had from them was to be, based on their strong performance, to be in the flattish area, let's say and I'd say that the results are in line with what we expected. Sorry, I can't give more specificity around it but yes.

And one quick follow-up. I know it's early days but could you frame the opportunity with the Venerable partnership you just announced. Any kind of details you can give around the pool of AUM you'll be open to the time line for transitioning that AAM to the Venerable branded funds, et cetera?

Yes. I think we're not going to give, again, sorry to not give too much detail on that but it's a multi-stage project with them, where we're going to be managing assets that we take on over a period of quarters. There's something that we've announced that came out quite recently and I think it's indicative of the way that we are able to work with insurance companies in general, to build things where they are able to more actively and efficiently hedge what's in their portfolio. So it was a customized solution that we built with them. And it's the type of approach we're talking to some other insurance companies about right now.

And your next question comes from Brian Bedell from Deutsche Bank.

Great. Just one clarification on the Putnam operating income guidance. Does that include the $25 million investment from Great-West, in that guidance? I guess, is that investment had [indiscernible].

Brian, the answer is no. [Indiscernible] $25 billion is incremental. We guided the $25 billion in terms of fee rate in mid-teens because a large portion of that is insurance general account related from [indiscernible]. We expect that to be incremented by about 50%, [ph].

And then, I can follow-up. Can you hear me better now?

Yes, it may be our audio that's having an issue. Brian, did you hear the response?

No, it kind of got garbled up.

Matt, why don't you try again?

Let's try again. This is better?

Much better. Yes.

Okay. Great. So no, the guidance did not include the fees associated with the $25 billion allocation. That's largely from Great-West Life. So the fee rate is around the mid-teens, on the $25 billion, if you calculate the revenue on that. In terms of implementation time line, we expect about half of that to come in the first calendar quarter next year. Well, let's call it the first quarter after we close and then the second half to come in over a period of a year -- one year. We'll obviously keep you updated on that, Brian.

Yes, that's great. And then just the last question, just on private credit versus public credit. So you've got a ton of different solutions across your specialist managers, including alternatives. Maybe just to zero in on the wealth channel. What are your thoughts about the timing of this reallocation toward fixed income when that picks up? And then, maybe just thinking about it with your private credit offerings versus the public side, do you think one will sort of went out over the -- not went out over the other but one will be larger than the other? And is that cadence, if you have to think about it over the next 2 or 3 quarters, is that sort of an equal cadence, do you think? Or do you think there'll be much larger swing into the public fixed income funds given just your scale there?

I think this is -- well, first of all, we know in talking to our large distribution partners, if there's just a massive amount. One of them commented that their most profitable area right now is their, basically the money market fund because of the massive amount of money sitting in cash on the sidelines. So the wealth channel is no different than the institutional channel in that. The institutional channel is likely to move first and then the wealth channel. The challenge, I think, between traditional fixed income and private credit is that banks just aren't lending like they used to. And so you're not even generating as much of the traditional fixed income as you used to. And so in order to have the investable universe, you're going to probably see the wealth channel starting to move more into private credit anyway. But the reality is, it is illiquid. And I think this is where we are on the product development side, thinking through creative solutions where you actually have products that combine private credit and traditional fixed income. So you have a component of liquidity with the excess returns that are generated in the private markets because of their illiquidity premium. So it's just as any alternative is in the wealth channel, it's complicated because you have the suitability and the DOL rule that was asked is, it's going to mean that the bar is even higher. You can't make mistakes. But from a responsible asset manager trying to figure out how to provide these excess returns in that channel, it's an area of great focus for us. So again, the banks are going to lend the way they used to lend the capital requirements have made it tougher and tougher. You see it in the numbers. And we think that private credit is going to continue to grow.

This concludes today's Q&A session. I would now like to turn the call back over to Jenny Johnson, Franklin's President and CEO, for final comments.

Well, I just want to thank everybody for participating in today's call. And once again, we'd like to thank our employees for their hard work and dedication. It's also -- I'd also like to add that we look forward to welcoming the impressive team at Putnam to Franklin Templeton when the transaction closes. And we look forward to speaking with you all again next quarter. Thank you.

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