(Reuters) -Investment manager Franklin Resources, better known as Franklin Templeton, reported a fall in third-quarter profit on Friday, as client outflow cut into its investment management fees, sending its shares down 6% in early trading.
Investors have been pulling out funds from Franklin subsidiary Western Asset Management after a federal investigation charged Kenneth Leech, the unit's former co-chief investment officer, with running a "cherry-picking" scheme.
Leech was charged with fraudulently favoring some clients' accounts over others when allocating trades.
The asset manager's total long-term net outflows were $9.3 billion during the third quarter. Excluding Western Asset Management, its long-term net inflows were $7.8 billion.
Franklin's total investment management fees, the largest contributor to its total operating revenue, fell 3% to $1.64 billion during the quarter.
U.S. President Donald Trump's erratic trade policies have unsettled the market, leaving investors waiting for greater clarity regarding the economic environment.
As a result, investors have increasingly shifted toward safer assets such as U.S. Treasury bonds and gold, pulling back from equities, which are a riskier bet to make at a time when the markets are volatile.
Franklin Templeton ended the quarter with $1.61 trillion in assets under management, down 2% from a year ago.
Excluding one-time costs, Franklin's quarterly profit was $263.4 million, or 49 cents per share, compared with an average of $326.4 million, or 60 cents, a year ago.
(Reporting by Atharva Singh; Editing by Shreya Biswas)
