(Bloomberg) -- Franklin Resources, manager of the Franklin and Templeton mutual funds, said fiscal first-quarter profit fell 6.2% as investors pulled money from the firm’s best-known global bond funds.
Net income for the three months ended Dec. 31 declined to $566.4 million, or 91 cents a share, from $603.8 million, or 96 cents, a year earlier, the San Mateo, California-based company said today in a statement. Analysts had expected earnings of 94 cents, according to a survey of 17 analysts by Bloomberg.
Slowing growth in China and a rising U.S. dollar have hurt the returns of Franklin’s top-performing global bond funds, which have been the company’s strongest source of deposits since the financial crisis of 2008. The firm saw $3.5 billion in investor redemptions in the quarter, leaving assets little changed from a year earlier.
“Given all the volatility we’ve seen in global markets, Franklin is going to be challenged to show organic growth,” Michael Kim, an analyst with Sandler O’Neill & Partners, said in a telephone interview.
Kim cut his rating on Franklin to “hold” from “buy” earlier this month, one of three analysts who downgraded the stock in January.
Michael Hasenstab’s $69 billion Templeton Global Bond Fund outperformed 99% of peers over the past decade, according to Morningstar Inc., helped by winning bets on bonds in countries from Ireland to Hungary. In the three years ended Dec. 31, 2011, the fund attracted $43 billion.
Last year the fund returned 1.6%, trailing 53% of rivals, according to data compiled by Bloomberg. Investors withdrew an estimated $2.8 billion in the quarter and $10 billion for the year from the U.S. and European versions of the fund, according to data compiled by Bloomberg.
Franklin managed $880.1 billion as of Dec. 31, down from $898 billion at the end of the previous quarter and little changed from $879.1 billion a year earlier.
Before today, Franklin shares fell 4.9% this year, compared with a decline of 5.3% for the 18-member Standard & Poor’s index of custody banks and asset managers.