Franklin Resources, Inc
Franklin Resources, Inc.

Risk Management

Managing risk is a fundamental part of our approach to investing, and has been since our firm was founded in 1947. Our portfolio managers assess risk as rigorously as they seek reward, leveraging time-tested strategies that have weathered a variety of market conditions.

Across our portfolios, we take a comprehensive, integrated approach to managing investment risk, based on the belief that risks should be:

Video: 1:30
Greg Johnson
Chief Executive Officer
Franklin Templeton Investments

Our Approach

Managing investment risk starts and ends with our portfolio managers, who look at both risk and return from every angle as they navigate today's complex investment landscape. Dedicated risk management specialists support our portfolio managers in conjunction with oversight committees and the application of sophisticated risk-management tools.

  • Our portfolio managers:
    • employ a fundamental, research-driven approach to managing assets.
    • assess risk at each stage of the investment life-cycle—including investment selection, portfolio construction and ongoing portfolio evaluation.
    • are backed by the strength and stability of our global organization, which enables them to maintain a long-term perspective.
  • Our dedicated risk management specialists are:
    • independent, providing robust analytics and critical, unbiased insight on each portfolio's risk profile.
    • integrated into our global portfolio and trading network, co-located with portfolio managers around the world, to support our activities in markets where we invest.
  • Our oversight committees focus on helping portfolio managers understand the most complex risk factors associated with:
    • derivatives and complex securities: review all complex securities to identify risk factors prior to purchase.
    • pricing and liquidity: analyze security valuations in emerging, frontier and other markets where liquidity may be limited.
    • counterparty risks: assess risks posed by the banks, brokerages, and investment firms who act as trading partners.
    • global product development: consider potential risk factors as part of new product development.
  • Our portfolio teams also leverage centrally-supported, best in class platforms that provide additional insight, including:
    • data analytics and modeling
    • portfolio compliance
    • trade monitoring and execution

Five Hidden Risks

Our comprehensive risk management approach seeks to identify and manage "five hidden risks" that others may miss and can cause unintended consequences for portfolios.

1st Hidden Risk 1. Hidden Portfolio Concentration
Unrecognized concentration in exposure to industries, currencies or market risk factors can compound the risk exposure in a portfolio.
    • More than 100 risk and performance specialists provide independent unbiased "top-down" analysis, which can help uncover hidden portfolio concentrations and expose unintended risks.1
2nd Hidden Risk 2. (Mis)use of Derivatives & Complex Securities
Lack of full understanding of performance or other characteristics associated with complex securities.
    • Established a Complex Securities Review Committee in 2007.
    • All positions in derivatives and complex securities are thoroughly vetted.
3rd Hidden Risk 3. Global/Emerging Market Risk
Under-managing risks associated with global, emerging and frontier markets securities, such as limited liquidity, reduced corporate governance and lack of standard accounting practices.
    • With over 600 investment professionals2 worldwide and offices in 35 countries3, we have global perspective built on first-hand local insight.1
    • Our 14 dedicated local asset management teams live and invest in local markets, bringing in-depth understanding of the markets they serve.1
    • Over 70 years of experience across global markets.1
    • We bring expertise in global, emerging and frontier markets.
4th Hidden Risk 4. Concentrated Exposure to Counterparties
Failure to diversify and actively monitor or manage counterparty credit exposure.
    • We established a Counterparty Credit Committee in 2007 to monitor and mange the risk posed by counterparties (the banks, brokerages and investment banks that act as trading partners).
5th Hidden Risk 5. Tunnel Vision
Relying on a single model-driven or purely quantitative approach or data source to evaluate and manage risk.
  • We take a multi-dimensional view of risk, leveraging:
    • Experienced portfolio managers and time tested-strategies.
    • Integrated and independent global risk and performance specialist teams.
    • Oversight committees provide guidance on the most complex risk factors.


Risk Management across Market Cycles
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The Case for Active Risk Management
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  1. As of 9/30/2014
  2. As of 9/30/2014. Investment professionals include portfolio managers, portfolio managers/analysts, research analysts and traders of Franklin, Templeton, Franklin Mutual Series and subsidiary investment management groups.
  3. May include joint ventures and strategic relationships worldwide.


Franklin Resources, Inc. is a global investment management organization operating as Franklin Templeton Investments. This material does not constitute investment advice or an invitation to apply for securities. Investors should seek professional financial advice and obtain a full explanation of any proposed investment before making a decision to invest. Investments involve risks. The value of an investment can go down as well as up, and investors may not get back the full amount invested. Not all products or services may be available in all jurisdictions. Please consult with your financial advisor about the availability of services or products in your country.