Matt Nicholls: First month.
Brennan Hawken: That’s just 1 month, right?
Matt Nicholls: Yes, just 1 month.
Brennan Hawken: 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?
Matt Nicholls: 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.
Brennan Hawken: Okay, perfect. That’s really, really helpful.
Matt Nicholls: 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.
Brennan Hawken: Got it. And that is — and when would the impact of the EFR would that happen pretty much right away?
Matt Nicholls: 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.
Brennan Hawken: The run rate impact by the way, it will be adjusted for the timing?
Matt Nicholls: 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.
Brennan Hawken: Got it. But the 0.2 is the way we can think about it and then we can adjust for timing accordingly.
Matt Nicholls: Exactly, that’s a good way of putting it.
Operator: Your next question comes from Alex Blostein from Goldman Sachs.
Alexander Blostein: 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?
Jennifer Johnson: 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?
Adam Spector: 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.
Alexander Blostein: 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.
Matt Nicholls: 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.
