Brian Bedell: Yeah, perfect. Okay. That clarifies that. And then just more broadly, I guess, just the ETF franchise has been growing nicely. Maybe Jenny, if you want to — and Adam also, or Matt, just talk about the — your long-term vision for active, semi-transparent ETFs. You’ve already got 12 managers using these products. If it’s 20 billion in the total ETF, which of course includes a lot of smart beta. But just how you’re thinking about this over, say, the next two years or three years, the demand from the marketplace for ETFs, but whether you think it might cannibalize mutual funds or you actually think it — you can develop strategies that will be incremental — into incrementally growing sales on top of your mutual fund franchise?
Jennifer Johnson: Yeah. So I think the key to think about with ETFs and frankly SMAs, a lot of the growth is driven from the fact that the world has moved more towards fee-based and how distribution fees are paid and things like traditional mutual funds, and then obviously the tax efficiencies and ETFs. So we view it as our expertise is our investment, risk-adjusted investment capabilities, risk adjusted returns. We have a very small passive suite in the ETFs, but we really focus on active management and we are agnostic to the vehicle in which we deliver that. So we look at an ETF as a vehicle which works really well in certain channels. On the wealth side, you’re starting to see more growth internationally in ETFs, more discussions, like in places I just came from, Asia, where you haven’t seen the kind of penetration there, but they’re interested in them.
And then things like SMAs are also very much growing in the wealth channel. And we look at Canvas as a great way to bring tax optimization to the SMA platform, so that it can be leveraged as a tool to provide tax-efficient, active SMAs to the market. We’ve had close to a $1 billion in a quarter in flows in the ETFs. I think we’re now over $21 billion when we’ve added Putnam into it and have had really great success diversifying our strategies into these other types of vehicles. So the Franklin Income Fund, now we have the Franklin Income focused ETF, which has again been really well received in the market since it was launched as well as having traction outside the US. So ETFs are incredibly important to us. Yes, it’ll probably cannibalize some of the mutual funds, but for — in our case, where we have been underpenetrated in the areas of retirement, that’s actually been an area where the tax benefit of ETFs hasn’t made a difference.
And you’re seeing very strong support for mutual funds in the retirement channel. So as we grow there, we’re able to make up for any of that cannibalization in that retirement channel while also growing our ETFs. So, Adam, do you want to add anything to that?
Adam Spector: Yeah, I would just reiterate the point that, for us, ETFs is about the vehicle, not about being passive. Just to put some numbers around that, 24% of our assets are smart beta and 36% are active. So our passive ETF business, it’s only 40% of our AUM is in passive, and was only 20% — passive was only 20% of our ETF flow for the quarter. So as more and more people begin to consider active management within an ETF wrapper, we think that’s great to us. And to the point about cannibalization, we would also say that direct indexing is the real threat to mutual funds, and that’s where we’re so thrilled to have Canvas on board to see the growth there, to see our ability to actually use Canvas to manage active portfolios now as well. We think that puts us in a very good position.
Jennifer Johnson: And I think that Canvas — the direct indexing is more of a threat to the passive mutual fund that has — and passive ETF. Yeah.
Brian Bedell: Yeah. That’s great color. Thank you so much.
Matthew Nicholls: We had a — we had another question come in to clarify a point around guidance on performance fees. So just to be clear, the 815 guide that I gave around the fiscal second quarter includes an assumption of $50 million of performance fees. The annual guide of $4.55 billion to $4.6 billion is excluding performance fees. Just as you know, we always give out annual guides excluding performance fees. I just want to be clear on that. That’s fully inclusive of Putnam. It includes the double rent, but it excludes performance fees.
Operator: Thank you. This concludes today’s Q&A 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, thank you, everybody, for participating in today’s call. And once again, I just want to thank our employees for their hard work and dedication to be able to deliver this quarter. And we look forward to speaking to you all again next quarter. Thanks, everybody.
Operator: Thank you. This concludes today’s conference call. You may now disconnect.
