00:12:28 · Jenny Johnson, Molly O'Shea
[00:12:28] S1: Yeah. So we're headquartered in Silicon Valley, so we have a growth equity team there. And honestly, as we all know, companies are waiting much longer to go public. And so, you know, some of the PM said, boy, these IPO kickers we used to get were not... That that were a kicker to our performance. We're not getting those. We should do some late stage venture because it's really late stage ventures what used to be you were underwriting at the IPO level. And so a mutual fund can open or an ETF can can hold up to 15% illiquid assets in there. You don't tend to run it at 15% because you'd have a breach if the market moves, but you could do 678%. And so we started to invest in late stage venture deals and then actually had some clients seeing the deals that we're in and said, Hey, could you set up a fund? So we actually now have a venture group, but they will often go into investment both with the venture fund, as well as some of the traditional portfolio managers who want to have exposure to late stage venture. [00:13:28] S0: So I found out that you guys had exposure to SpaceX. [00:13:31] S1: We did, Anthropic, a bunch of them. Yes, exactly. If you're there and you have connections with the entrepreneurs, with the other venture community, and being headquartered there, you know, you've to remember, your kids tend to go to school with these people, they're in the neighborhood, they're community people, and you get to know them, that allows you to have access to those deals.
00:13:54 · Molly O'Shea
[00:13:54] S0: This episode is brought to you by Brex, my favorite. You become what you spend on, and I refuse to spend my time on work that shouldn't exist. Expense reports, receipt chasing, and manual closes. The companies building what's next from Vercel, OpenAI, Anthropic, Granola, and Deepgram all made the same call. They all run on Brex. Brex is the intelligent finance platform that combines cards, expenses, and banking into a single stack with agentic finance built in. AI agents that handle expenses automatically, enforce policy before spend happens, and close your books in minutes. That's why Sourcery runs on Brex, so I can spend time on building and not busy work. It's time to get Brex AF! Learn more at brex.com/sorcery. That's brex.com/sourcery. Bye. From Handshake to Signature Faster, Harvey, the AI platform built for legal work, is trusted by 80% of the Am Law 100 and over 20% of the Fortune five hundred. Learn more today at harvey.ai. That's harvey.ai. AI needs more than chips. It needs power, land, and infrastructure. Zone develops next generation data center campuses, partnering with AI companies, site developers, and technology leaders to bring compute online faster and at scale. Zone is building the foundation of the AI frontier. Visit zonefrontier.com to learn more. That's zonefrontier.com to learn more. SpaceX is particularly interesting name because they came to the market sooner than anyone else, and they have quite the diversified strategy, and more often than not, they're trying to label themselves as an AI company. And we were talking about this earlier, the makeup of that revenue, whether it was getting these data center contracts right before the IPO, the Starlink angle to this, getting to the consumer side of things, and then the launch costs that will then kind of bring down the economics of everything else. So for a company like SpaceX, what are you trying to watch out for? Do you think that this one will become I think Elon tweeted it will become the most profitable company on Earth by an order of magnitude.
00:16:16 · Jenny Johnson, Molly O'Shea
[00:16:16] S1: So there's a lot in there. Let me first address one thing. Maybe we should in history, every time everybody renames their business based on an AI or a .com, and we just changed our parent company name from Franklin Resources to Franklin Templeton. And when I said to my dad, Why were we ever called Franklin Resources? He said, Oh boy, in the 1970s, you couldn't sell it. The stock market was terrible. You couldn't sell anything, but you could do gold investing because there was high inflation. So if you had resources next to your name, that helped you in the stock market. There you go. Right? Buddy, this is a trend that people do all the time. They'll grab it. So what I always say is, know, stick to your knitting and say what you are. Having said that, look, I've used Starlink for... I have a place in Montana, and I gotta tell you, it was a game changer for me because I could never get good high speed Internet, And the portable Starlink is amazing. And so I think that everybody I've talked to who uses Starlink is a huge fan. So Starlink's in there. We've seen and if you read Walter Isaacson's book Elon, you'd recognize how much he has actually changed space investment and travel, and really fought the system that was sort of gumming itself up. So all about innovation, cost efficiency. I honestly believe that and Elon seems so focused on getting to Mars. The thing is, he makes these statements and we all say, Oh, that's ridiculous. And maybe he doesn't get there right on time, but he often delivers them. [00:17:53] S0: Like flying cars.
00:17:53 · Molly O'Shea, Jenny Johnson
[00:17:53] S0: Like flying cars. [00:17:54] S1: Exactly, although I saw a very funny flying car company who said, Welcome to the race! Whatever. You know, the work he's doing in robotics is amazing. You know, all of which are needed to his vision to colonize Mars. So, you know, I think it's quite possible. I think your only risk there is you have a lot of key man risk with Elon. We all have to hope he stays healthy and can continue to innovate. [00:18:26] S0: He's a man of mystery. So I want to shift a little over to more of your career and coming into the as CEO. So you came into the seat as CEO, and immediately were leading one of the firm's largest deals. This was the Legg Mason deal for $4,500,000,000 and this also doubled your AUM. So walk me through that process and why you had the conviction and what the reasoning was with that. And then I definitely want to talk through your acquisition strategy, because I heard and I saw that you guys have done 17 acquisitions in the last six years.
00:18:58 · Jenny Johnson
[00:18:58] S1: Yeah, so on the Legg Mason deal, there were parts of the market that we just knew we needed to fill out, and Legg Mason filled those things out. One, they had the largest category is core fixed income, and they had a huge franchise with core fixed income. We want to get bigger in private markets. We bought a private credit manager. Had Clarion Partners, is an outstanding real estate manager. So that got us into the private markets. And at the time, Franklin was 75% sort of retail wealth channel, 25% institutional, and Legg Mason was exactly the opposite. So we suddenly became 50% institutional clients, 50% wealth clients. And so that just balances out your business better. So for all those reasons, it made a ton of sense. The challenge was... So that was announced, like, five days after... And we'd obviously been working on it for a year, but five days after I became CEO, the problem was three weeks after everything was locked down with COVID. And, Of course, the market tanked. It was really interesting because it never occurred to me to think, Oh, that's too bad. We got this deal and we locked in this deal. Some of the articles are written up, Oh, poor Franklin, they can't get out of it. If you're getting into the deal because it's a good strategic fit, you're going to roll through those ups and downs. We knew it was an important strategic fit. Frankly, asset managers in down markets don't tend to transact because they're a great cash flowing business and people know they'll bounce right back with the market. So we were really happy to do it regardless, but it just meant there was much greater complexity in trying to close that deal. Because what do you do when you do a deal? I mean, part of it is you're just trying to figure out your talent. You know you're going to have to reduce some of it. You have a lot of overlap in your corporate services, finance, HR, legal. So you're trying to pick the best athlete and put together the best team. And I think a big mistake that people who are acquirers do is they just assume that their team is the best team. They really wanna try to decide that you can pick the best athletes across the board. And so suddenly, we weren't really able to travel and go meet the people. And so you had to do everything over video.
00:21:10 · Jenny Johnson, Molly O'Shea
Fortunately for us, because we're so global, we had already adopted an environment where you often had people on video in meetings. Now that's standard. But back then, that was something that people were really skeptical and they didn't really believe in, but it was already part of how we operated. And so we ended up closing the deal sixty days early, which was kind of amazing at the time. I don't think we ever lost faith that it was the right deal for us, and it turned out to be an amazing deal for us. [00:21:39] S0: Of the 17 acquisitions you've done in the last six years, what are the themes for that? What are the reasons? I know you're on this growth trajectory and that kind of thing, so maybe talk through that, and then the higher goal.