Jenny Johnson, a Leading Figure on Wall Street: “China’s Control of Essential Minerals Poses Major Risks to the US”

Jenny Johnson was at the movies with her children when her phone rang. She stepped out of the screening room, and amidst the aroma of freshly made popcorn, answered the call. “What’s your final offer?” asked Nelson Peltz on the other end, according to the Financial Times. The activist investor held 10% of fund manager Legg Mason and aimed to extract the maximum value from his stake. The CEO of Franklin Templeton responded with the figure that her board had approved for the firm’s takeover bid: $4.5 billion. This amount, combined with another $2 billion of Legg Mason’s debt, became the highest sum ever paid in a corporate transaction by the investment firm founded by Johnson’s grandfather in 1947, and one of the largest in the asset management industry’s history. After hanging up, the executive returned to her seat and finished watching the movie.

It was a daring move. Not just because of the staggering price, which many analysts deemed excessive, but also due to the timing. The official announcement was made in February 2020. A few days later, the Covid pandemic took hold. Nevertheless, Johnson has made it clear since she was appointed president and CEO of Franklin Templeton in 2019 that she does not buckle under pressure. Over the past five years, she has made 10 acquisitions, raising the firm’s assets under management from $700 billion to $1.68 trillion.

Question. The volume of money your investment management firm manages surpasses the GDP of most countries. Do you consider yourself a powerful person?

Answer. You know what? I never view it that way. I feel a tremendous responsibility. People entrust us with their most significant financial goals: retirement savings, paying for their children’s college, ensuring they can cover medical expenses. Thus, we must provide the right products tailored to people’s risk profiles, to help them meet their objectives.

Johnson, 61, spoke with EL PAÍS in early June during a brief visit to Madrid. Before the interview, she had a photoshoot during which her personal assistant adjusted her hair, scarf, and lip gloss. Everything needed to look perfect for a woman who exudes confidence. Her firm’s strategy for growth through acquisitions, rather than an aggressive campaign, was purely about survival: eat or be eaten. By the end of the last decade, the financial sector was shifting rapidly, and Franklin Templeton was perceived by clients as outdated, according to an internal survey. Its flagship fund, which specialized in public debt, had seen better days and was experiencing withdrawals in an era of negative interest rates. Additionally, the surge in passive management was detrimental to firms like hers, which specialized in asset selection. Technological advancements were also irrevocably altering the financial industry’s landscape.

Question. Acquiring so many firms in a short period, while a substantial financial commitment, also poses the challenge of integrating various cultures into a single project. Does that concern you?

Answer. Those 10 acquisitions aimed to position the company for how the asset management business is evolving. If you look back just five years, we faced several challenges. Firstly, we were predominantly wealth channel retail. When we acquired Legg Mason, they were the complete opposite. Now, we’re nearly evenly split between institutional and retail. Secondly, private markets. The acquisitions of Clarion Partners, Benefit Street Partners, El Centro, and Lexington Partners have enabled us to participate in the secondary private equity space. We grew our venture capital business organically, although it remained relatively small. It’s much easier to go out and acquire. The focus now is on effectively integrating all of those acquisitions.

Q. ClearBridge, Alcentra, Lexington, Putnam… all the firms you’re integrating are keeping their own brands and investment teams. Why? Doesn’t that complicate the presentation of a unified message?

A. In the asset management field, when you acquire a firm, you’re purchasing people and their investment processes. Therefore, we don’t diminish value by instigating many changes. We integrate operational support and technology, but we allow the investment teams to remain independent.

Johnson’s efforts come at a time when major players in finance are venturing into new markets. These private markets involve less liquidity and oversight, trading so-called alternatives, which include debt, infrastructure, venture capital, and real estate. BlackRock, the world’s largest asset manager (with over $11 trillion under management), has pioneered this transition, which Franklin Templeton has enthusiastically embraced. Both are targeting wealthier clients whom they can charge higher fees in exchange for offering assets that correlate less with the economy. Moreover, as these products are long-term, they ensure greater loyalty from fund participants.

Q. Will you continue to grow through acquisitions, and in which sectors?

A. The primary trend is alternatives, particularly the democratization of private markets. We aim to direct these products to a broader audience. The second significant trend is customization. Thanks to technological advancements, we can offer tax-efficient, customized portfolios. We operate in over 150 countries worldwide, each at different stages of development, but we observe these trends across all of them.

Q. Speaking of democratizing a market that inherently carries much more risk than stocks and bonds, do you genuinely believe that alternatives are suitable for everyone?

A. Suitability is crucial for any investment, even traditional ones. Private markets are not suitable for everyone, and obtaining a suitable portfolio for clients is vital. However, there is a segment of ultra-high net worth individuals who should allocate between 1% to 15% of their portfolios to alternatives.

Q. Franklin Templeton has diversified but remains predominantly an active manager. In a climate where investors, lured by low fees and a long bull market, have flocked to passive index-tracking funds, are you not apprehensive about missing out on considerable business?

A. Yes, we mainly focus on active management. We believe that prioritizing risk-adjusted returns is the proper approach. In fact, passive can be riskier than many realize. For instance, in April, when the market plummeted by about 19%. Currently, the market, after being highly concentrated, especially in the U.S. technology sector, where the Magnificent Seven accounted for over 30% of the market, is now broadening. When considering how clients should perceive their portfolios, life isn’t always smooth; it’s fraught with unexpected risks. Thus, we advocate for long-term investing with a focus on risk-adjusted returns.

Rupert H. Johnson, a broker who built his career on the stock market, founded Franklin two years after World War II ended in New York. Named after Benjamin Franklin, one of the founding fathers of the United States and whose face appears on the $100 bill, the firm reflects Franklin’s prudent views on the financial world. Rupert led the management company, initially specializing in fixed income, until 1957 when his son took over. Charles B. Johnson facilitated the company’s significant advances, including its initial public offering in 1971, relocating to San Mateo, California, opening its first international office in Taiwan in 1986, and merging with Templeton, a Bahamas-based company that focused on emerging markets, in 1992. In 2005, his son Gregory E. Johnson became CEO, continuing that expansion until 2019, when he passed the leadership to his younger sister Jenny, retiring to chair the legendary San Francisco Giants baseball team. The Johnson family retains 40% of the shares in the company, which boasts a market capitalization of $12 billion and recorded revenues of $8.5 billion in its last fiscal year (ending in September), with a profit of $464 million.

Q. You are the third generation and fourth Johnson to lead Franklin Templeton. Your family seems to have limited faith in external talent…

A. The nominations committee believed I was the right fit, and the board validated that choice. One advantage of operating a family business is the long-term perspective. One challenge public companies face today is the immense pressure on CEOs for quarterly earnings, which sometimes prevents them from making necessary investments for the next five to ten years.

Q. Alongside Abigail Johnson of Fidelity, you are among the few women leading large investment management firms. Why are there so few women in the industry?

A. Good question. I’m not sure. We’ve certainly seen improvements, but it’s an area the industry is trying to enhance. The industry recognizes that women, at some point, control family finances—if nothing else, because they live longer than their husbands. Establishing a connection with them is crucial. We genuinely want our workforce to represent the demographics of our clients. While I’m not in favor of quotas, it’s essential to acknowledge that a diverse talent pool will yield better solutions.

A significant issue in conversations with Johnson and other fund managers, analysts, and bankers in recent months is Donald Trump and his tariff policies. The head of Franklin Templeton, who earned over $17 million last year, isn’t afraid to address this contentious topic. In prior interviews, she noted that being the sixth of seven siblings taught her to speak up to ensure her voice was heard. Rather than joining the criticism of the president’s policies, she views them as a strategy that could benefit the country.

Q. What are your thoughts on the new U.S. administration?

A. I believe he has the right instincts on—you know, people refer to it as a tax cut, but it’s actually a tax extension. If Congress fails to pass it, we’ll encounter a massive tax increase in the U.S., which will slow the economy. I also believe his instincts on tariffs are correct. While I generally prefer free trade, certain biases have existed in the post-World War II system, and it’s likely time to address them. The U.S. has an open market. People can sell goods here, but we can’t sell as freely in other markets. A more equitable landscape is needed. Furthermore, U.S. administrations often think in four-year cycles, whereas we need to adopt a longer-term view. Look at China, which is securing core minerals and resources needed for technology. We need to develop strategies. That agreement with Canada pertains to some of those essential goods. Trump’s remarks on Greenland, for instance, actually aim to resolve sourcing issues for key minerals. It’s a significant risk for the U.S. and other countries if China controls all the critical minerals necessary for chip manufacturing and, ultimately, defense spending.

Q. Traditionally, the United States has been a consistent country that honored agreements and multilateralism. Now, times have changed. Are you concerned that some investment flows may shift away from the U.S. to more stable markets, such as Europe?

A. Europe has been the best-performing market. Why? For various reasons, including increased investment in defense, especially with the U.S. markets having risen by 50% in the last two years… The highest innovation hasn’t emerged from Europe as it has in the U.S. Not because European entrepreneurs lack capabilities, but due to how their capital markets are structured. Europe must reevaluate regulations that hinder growth opportunities. Capital gravitates towards where it’s treated favorably. Wherever markets and investment returns are advantageous, capital will flow there. That’s influenced by the rule of law, governance, taxation, education, and the entrepreneurial ecosystem.

Q. What do you view as the greatest economic risk at the moment?

A. The U.S. deficit. It’s concerning because the U.S. needs to fund those treasuries, which will come at a cost to attract investors. While I’m not suggesting there’s a risk to the U.S. dollar as a reserve currency, the question remains: at what cost must they attract investment to fund the treasuries?

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