Jennifer M. Johnson
President and Chief Executive Officer at Franklin Resources
Thank you, Selene. Hello, everyone, and thank you for joining us today to discuss Franklin Templeton's fourth quarter and fiscal year 2023 results. As usual, Matt Nicholls, our CFO and COO; and Adam Spector, our Head of Global Distribution are joining me on the call.
Over the past several years, we've made great strides in transforming our business, all-in an effort to meet the needs of our clients and shareholders around the globe, no matter the market environment. We've done this by creating a diversified company that offers a broad range of investment expertise and capabilities across asset classes, investment vehicles, and geographies. Today, we're able to offer our partners and investors, the ability to fulfill their comprehensive investment needs across public and private markets and in the vehicle of their choice, as one firm with specialist investment managers operating around the globe. In addition, we have made important investments in value-added services, including technology, digital wealth and customization, in order to be on the forefront of innovation in areas increasingly important to our clients.
As we look back over our fiscal year, challenging global financial markets and geopolitical uncertainty weighed heavily on investor sentiment. The so-called Magnificent Seven, seven large US tech companies have primarily driven all of the gains in global stocks this year, and in our fourth quarter, we saw heightened volatility lead to increasing pressures and declines across equity and fixed-income markets. We believe markets like the one we're in, reinforce the value of active management with a long-term investment horizon. So often in these times of uncertainty, where the best opportunities to capture value are identified. In this complex and volatile market environment, it's no surprise that there is a tremendous amount of cash sitting in bank accounts and in money market funds capturing, what are the most attractive short-term yields in more than 15 years.
Global money market assets stood at 7.4 trillion as of September 30th, the highest asset-level since Morningstar started collecting the data in 2007. We have been actively engaging with our clients to understand their needs and address their strategic goals. Many clients continue to look for additional access to private markets, alternative credit in particular. And as yields have become more attractive, clients have had a renewed interest in fixed-income. We continue to provide insights and thought leadership to help them navigate the latest conditions, including drawing upon the resources of our various specialist investment managers, and the Franklin Templeton Institute. Against this backdrop, we continue to manage our global business with a focus on areas of organic growth, expense discipline and strategic transactions.
As such, this year we are pleased with the progress made executing on our long-term corporate priorities by expanding our investment capabilities across vehicles and deepening our presence in key markets and channels. For the fiscal year, notwithstanding 20% lower inflows. Long-term net outflows improved 23% from the prior year. Long-term net flows were positive in several key areas; including Alternatives, Multi-Asset, ETFs, Canvas and the high-net worth channel. In addition, our Asia-Pacific region generated positive long-term net flows for the fiscal year. Our EMEA region turn positive in the second half of fiscal 2023 and our non-US regions posted positive net flows in the fourth quarter.
One of our strategic priorities has been to increase our scale in key segments of the industry, reflecting long-term client demand. In this pursuit to offer more choice to more clients, we closed the acquisition of Alcentra, a leading European credit manager, doubling our alternative credit AUM. Firmwide alternative AUM increased by over 13% to $255 billion from the prior year, making Franklin Templeton one of the largest managers of alternative assets. Alternative AUM represents approximately 19% of our long-term AUM, and approximately 25% of adjusted revenues, excluding performance fees in fiscal 2023.
Alternative assets management fee revenues increased 36% year-over-year. Furthermore, we were pleased to announce the pending acquisition of Putnam Investments with $136 billion of AUM, and our relationship with Power Corporation and Great-West Lifeco, strengthening our presence in the retirement and insurance segments. The transaction will enable us to further bolster our presence in these key market segments to better serve all our clients and remains on-track to close in the fourth quarter of calendar 2023.
Industry-wide, we continue to see consolidation of asset management relationships. In this context, there are increased expectations for value-added services and we believe we are well-positioned as a strategic partner, due to the breadth and depth of our investment capabilities, technology, content and capital resources. As we look ahead in 2024 and beyond with better clarity on interest rates and markets in general, there will be an increased likelihood of investors moving money from the sidelines. We believe we are well-positioned to capture money in motion as clients benefit from the expertise of each of our specialist investment managers, particularly in areas where there's strong client demand such as alternatives income, fixed-income solutions and Custom Indexing.
Turning now to our specific numbers for the fiscal year. Starting first with assets under management and flows. Ending AUM was $1.37 trillion, an increase of 6% from the prior year, primarily due to market appreciation and the acquisition of Alcentra. Investment performance continues to be strong and resulted in 61%, 48%, 47% and 61% of our strategy composite AUM outperforming their respective benchmarks on a one-year, three-year, five-year and 10-year basis. Compared to the prior year, AUM outperforming benchmarks stayed the same in the three-year period and declined in the five-year and 10-year periods. One-year performance improved significantly due to several equity strategies, including non-US strategies and select US taxable fixed-income composites.
Long-term net outflows were $21 billion and improved by 23% from net outflows of $28 billion in the prior year. Reinvested distributions were $21 billion compared to $32 billion in the prior year. Our long-term net flows while challenged for the year continued to benefit from a diversified mix of assets and strong presence in key areas. Multi-Asset saw a 66% increase in net flows from the prior year and were positive for all four quarters, including nearly $8 billion, driven by Franklin Income Fund, Franklin Templeton Investment Solutions and Canvas, our Custom Indexing solution platform.
In fact, our flagship Franklin Income Fund celebrated its 75th anniversary in August. The strategy follows a flexible, value-oriented investment philosophy seeking income and long-term capital appreciation by investing in dividend, paying stocks, bonds and convertible securities. The Fund has successfully delivered uninterrupted dividends across all market cycles, ever since its launch in 1948. It's also a great example of how we're giving investors greater choice and how they access the strategy, including through SMAs, sub-advised strategies and then in actively managed ETF vehicle around the globe. For the fiscal year, alternative net inflows were approximately $6 billion, driven by growth in private market strategies, which were partially offset by outflows in liquid alternative strategies. Benefit Street Partners, Clarion Partners, and Lexington Partners together generated net inflows of nearly $11 billion.
We continue to make strides in alternative assets, unlocking new opportunities for investors in our firm. Retail and high-net-worth investors remain under allocated in alternatives, relative to institutions. Client interest was strong for alternative strategies on wealth management platforms under the alternatives by Franklin Templeton brand in the US, which was launched earlier this year. For example, we anticipate over 20% of the total capital raised in our current secondary private-equity fund to come from the wealth management channel. We continue to focus on client education initiatives through our alternative focused podcasts and webinars, partnering with the Franklin Templeton Academy.
Fixed income net outflows decreased by approximately 50% to $16 billion this fiscal year with net flows, significantly improving starting in the second quarter of the fiscal year. In a year when all eyes were on the bond markets and interest rates, we continue to benefit from having a broad range of fixed income strategies with non-correlated investment philosophies. Brandywine Global saw positive net flows for the year. Franklin Templeton fixed income saw positive net flows in the second half and Western Asset had positive net flows in its core and muni products for the year.
Fixed income strategies also saw net flows in ETFs and starting in the second half of the year in SMAs. With the addition of Putnam, we will further strengthen our fixed income offering, particularly with ultrashort, stable value and longer duration strategies with strong long-term investment performance. Equity net outflows were nearly $19 billion. The risk-off environment continued to impact investor sentiment on select equity growth strategies, which were partially offset by net inflows into large-cap core, international, smart beta quantitative and emerging market strategies. We believe that emerging markets equities could be a potential bright spot in equities as investors look across broad markets for opportunities.
Turning to ETFs, since launching our ETF business in 2016, we have provided our clients with a broad range of investment strategies and have achieved significant growth milestones. ETFs generated net inflows of nearly $4 billion in the fiscal year, representing four consecutive quarters with net flows of approximately $1 billion and AUM ended the quarter at over $16 billion. We continue to launch new and innovative ETFs based on client interest. During the fourth quarter, both Western Asset and Brandywine Global launched active fixed income ETFs, and we expect to see strong client interest in both strategies.
We are a leading franchise in SMAs with $113 billion in AUM, an increase of 13% from the prior year. We saw momentum in our SMA platform with $1.3 billion of long-term net flows in the second half of the fiscal year. This year, we continued to expand our SMA capabilities with launches focused on customization such as tax managed overlay and SMA products of key flagship strategies, including the Franklin Income Fund.
Through new technologies, we're continuing to enable personalized portfolio solutions that seek to improve bespoke outcomes for investors. A good example is Canvas, which has achieved net inflows each quarter since the platform launched in September 2019, and AUM has more than doubled to $4.8 billion since the acquisition closed. This year, Canvas generated net inflows of approximately $1.5 billion and had 20 new partnerships. In addition, it continues to have a robust pipeline.
Private Wealth Management AUM ended the quarter at $34 billion with Fiduciary Trust International, generating its 12th consecutive quarter of long-term net inflows. Fiduciary Trust provides personalized solutions to high net worth individuals and multifamily offices with an average client relationship of 16 years. It is a growing client base and a platform well positioned for long-term growth.
Since 2010, Franklin Templeton has been the investment manager and sole administrator of Fondul. In July, Fondul's largest holding, Hidroelectrica, Romania's leading energy producer, broke a record as being Romania's largest initial public offering on the Bucharest Stock Exchange. The listing reflects our ability to provide partnerships with public and private institutions in emerging markets to deliver long-term value for all stakeholders and our enduring commitment to developing the country's local capital market, promoting corporate governance and transparency.
Looking forward to 2024, we will continue to further expand our business and invest in key areas of growth that extend our ability to offer more choice to more clients in more places, including alternative asset management, insurance and retirement channels, customization and solutions for clients, technology-related distribution, and private wealth management, specifically Fiduciary Trust International. We are proud of the work that we have done over the past several years to further grow and diversify our business. It makes us a more resilient organization over the long run and reflects our focus on positioning Franklin Templeton as a premier partner.
Finally, I'd like to thank our dedicated employees around the world for all their efforts in this past year to grow our business by always putting our clients first in a continuously evolving industry.
Now I'd like to turn the call over to our CFO and COO, Matt Nicholls, who will review our financial results from the fiscal quarter and year as well as provide an update on the Putnam acquisition. Matt?
