Money manager sees client demand for flexible growth strategy. Franklin Templeton Investments has debuted a multi-cap growth separately managed account (SMA) on Morgan Stanley’s sub-advisory platform. The new portfolio – an SMA take on a 15-year-old Franklin mutual-fund strategy with $2.7 billion under management – is intended to meet end-client demand for new approaches to growth investing.

“The strength of this portfolio lies in its flexible approach to investing in stocks,” says Frank Felicelli, CIO of Franklin's SMA subsidiary Franklin Templeton Portfolio Advisors (FTPA). “We are able to invest wherever we're finding the best opportunities across the entire market-cap spectrum, drawing on the research expertise of over 40 investment professionals at our [research] affiliate [Franklin Advisers] to examine the entire structure of a company and follow it through its growth cycle.”

The new multi-cap strategy is part of Franklin’s lineup of domestic growth portfolios, which includes small-cap, mid-cap and large-cap core approaches. The investment minimum for the multi-cap growth SMA, as with all of FTPA's equity portfolios, is $100,000.

Waking up

With many others, Franklin holds that the market is in early phase of a new growth cycle. “We’re seeing a large demand for this asset class,” says Brad Hanson, FTPA’s head of sales. “Many investors are waking up to the fact that they are underweight growth,” he says. “As investors start rebalancing their portfolios, we’ll be able to fulfill their growth allocation with our domestic growth portfolios.”

But the multi-cap portfolio confers benefits that other approaches simply can’t, adds Hanson. “You can’t just fill in the style boxes and call it a day,” he says. “You need to have a part of the portfolio that is flexible enough to move quickly between capitalization ranges.”

Another advantage to a multi-cap approach, says Hanson, is the ability to “acquire a stock early in its lifespan and hold it as it grows,” and so – potentially at least – reduce portfolio churn. “In some portfolios you’d have to sell when the stock’s capitalization goes up.”

In addition to Morgan Stanley, a new win, “another major firm” has been distributing Franklin’s multi-cap SMA for the past several months, says Hanson. He’s not at liberty to name it though. Among firms that distribute Franklin’s SMAs are Merrill Lynch, Smith Barney, Wachovia, UBS, Lockwood and Fidelity’s registered investment advisor platform.

Despite all that big-name distribution, Franklin – in common with other established SMA managers – is looking for new distribution channels. Hanson says it’s especially keen on “some of the regional brokers that have had success with SMAs.” Banks, however, are “more of a challenge.”

In addition to managing single-style SMAs, FTPA also contributes portfolio models to sponsors running multiple-discipline accounts.

San Mateo, Calif.-based FTPA manages over $6 billion in SMA assets. –FWR

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