Jenny Johnson, one of Wall Street’s most powerful women: ‘It’s a huge risk to the US if China controls the key minerals’

Jenny Johnson was at the movies with her kids when her telephone rang. She left the screening room and amid the scent of freshly made popcorn, took the call. “What’s your final offer?” said Nelson Peltz on the other end of the line, according to the Financial Times. The activist investor owned 10% of fund manager Legg Mason and wanted to squeeze the maximum value from his shareholding. The CEO of Franklin Templeton answered with the figure that her board had approved for the firm’s takeover bid: $4.5 billion. That amount, to which another $2 billion of Legg Mason’s debt was added, became the highest sum ever paid in a corporate transaction by the investment firm that was founded by Johnson’s grandfather in 1947, and one of largest in the history of the asset management industry. After hanging up, the executive returned to her seat and finished watching the movie.

It was a risky play. Not just because of the staggering price, which many analysts considered an overshot, but because of the timing. The official announcement went out in February 2020. A few days later, the Covid pandemic took hold. Still, if there’s something Johnson has made clear since being named president and CEO of Franklin Templeton in 2019, it’s that she doesn’t crack under pressure. During the last five years, she has made 10 acquisitions, increasing the firm’s assets under management from $700 billion to $1.68 trillion.

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

Answer. You know what? I never think about it that way. What I think about is, I feel tremendous responsibility. People entrust us with the most important goals of their lives. Their retirement savings, making sure they can pay for their kids’ college, making sure they can pay for medical coverage. And so we have to ensure that we have the right products, depending on people’s risk profiles, to make sure they can meet those goals.

Johnson, 61, spoke with EL PAÍS at the beginning of June on an express visit to Madrid. Before the interview, she had a photoshoot where between shots, her personal assistant retouched her hair, adjusted her scarf and freshened her lip gloss. Everything had to look under control for a woman who transmits self-assurance. Her firm’s race to grow through acquisitions, more than an offensive campaign, was pure survival. Eat or be eaten. At the end of the last decade, the financial sector was changing at a high velocity, and Franklin Templeton was seen by its clients as having gone out of style, according to an internal survey. Its flagship fund at the beginning of the 20th century, which specialized in public debt, had seen better days and was suffering from a drain on funds in the era of negative interest rates. In addition, the boom in passive management was a blow to firms like hers, which specialized in asset selection. Not to mention, technological advances were changing the paradigm of the financial industry forever.

Question. Buying so many firms in such a short amount of time, in addition to being a huge financial commitment, also presents the challenge of integrating different cultures into one project. Does that not worry you?

Answer. Those 10 acquisitions were all about positioning the company for how the asset management business is evolving. If you go back just five years, there were a couple of challenges for us. Number one, we were primarily just wealth channel retail. When we acquired Legg Mason, they were the opposite. Now, we’re pretty evenly split between institutional and retail. The second thing was private markets. The acquisitions of Clarion Partners, Benefit Street Partners, El Centro, Lexington Partners, have allowed us to play in the secondary private equity space. We grew our venture capital business organically, but it was still pretty small. It’s much easier to go acquire. Now, it’s been about really digesting all of those acquisitions.

Q. ClearBridge, Alcentra, Lexington, Putnam… all firms that you are integrating are maintaining their own brand and investment teams. Why? Doesn’t that create problems when it comes to presenting a unified message?

A. In the asset management business, when you acquire a company, you’re buying people and their investment process. So we don’t destroy value by going in and making a lot of change. We integrate operational support, technology, but we leave the investment teams very independent.

Johnson’s work is taking place at a time when big players in the world of finance have set sail for new business waters. These are private markets where, with less liquidity and oversight, so-called alternatives are traded. This refers to debt, infrastructure, venture capital and real estate. BlackRock, the world’s largest asset manager (with more than $11 trillion under management), has been the pioneer on this journey, on which it has been enthusiastically joined by Franklin Templeton. Both seek wealthier clients whom they can charge higher fees in exchange for offering assets that are less correlated with the economy. Furthermore, as these are long-term products, they guarantee greater loyalty from fund participants.

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

A. The key trend is alternatives, and within that, the democratization of private markets. We want to direct those products to a wider public. The second big trend is customization. Thanks to technological advances, it’s possible to offer tax efficient, customized portfolios. We are in more than 150 countries across the globe, all at different stages of development, but we see those trends in all of them.

Q. Speaking of democratizing a market that, by its nature, features much more risk than stocks and bonds, do you really think that alternatives are for everyone?

A. Suitability is so important for any investment, even it’s a traditional one. Private markets are not right for everybody, and getting a suitable portfolio for clients is really important. But there’s a segment of clients with ultra-high net worth who should have a percentage of their portfolio, anywhere from 1% to 15%, in alternatives.

Q. Franklin Templeton has diversified, but it continues to be a fund manager that above all, has an active strategy. In a world where investors, attracted by low fees and a long bull market, have flocked to passive index-tracking funds, aren’t you afraid of missing out on a large share of business?

A. Yes, we’re largely an active manager. We believe that using risk-adjusted returns is the right focus. And actually, passive can be more risky than people understand. You’ve seen it, right? In April, when the market dropped 19% or something. Right now, you’re seeing a market that had gone from being very concentrated, especially in the United States’ technology sector, where the Magnificent Seven accounted for 30-plus percentage of the market, to now having a much broader return market. When you think about how clients should experience their portfolio — life is never a smooth road. It always has unexpected risks. So we say if you invest for the long run, you’re better off thinking about risk-adjusted returns.

Rupert H. Johnson, a broker who made his career on the stock market, founded Franklin two years after the end of World War II in New York. The firm was named for Benjamin Franklin, one of the founding fathers of the United States whose face appears on $100 bill, due to Franklin’s prudent views of the financial world. Rupert headed the management company, which initially specialized in fixed income, until 1957 when his son took over. Charles B. Johnson led the company’s great leap forward with its initial public offering in 1971, followed by its move to San Mateo, California, the opening of its first overseas office in Taiwan in 1986, and its 1992 merger with Templeton, a Bahamas-based company that specialized in emerging markets. In 2005, his son Gregory E. Johnson was appointed CEO and continued that expansion until 2019, when he handed over the reins to his younger sister Jenny, retiring from the limelight to chair the legendary San Francisco Giants baseball team. The Johnson clan retains 40% of the shares of the company, which has a market capitalization of $12 billion and in its last fiscal year (which ended in September) had revenues of $8.5 billion, for a profit of $464 million.

Q. You are the third generation and fourth Johnson to lead Franklin Templeton. Your family doesn’t seem to have a lot of trust in external talent…

A. The nominations committee thought I was the right person and their choice was confirmed by the board. One thing about working in a family business is that you think longer-term. One of the challenges for public companies today is there’s so much pressure on a CEO for quarterly earnings that sometimes they don’t make the needed investment that’s going to be important five and 10 years out.

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

A. Good question. I don’t know. I mean, we’ve definitely gotten better, but it’s something I think the industry is trying desperately to improve. One of the things the industry is learning is that women, at some point, control the money in their family ‚ if nothing else, because they outlive their husbands. You have to have the connection with them. We really want to make sure that our employees represent a view of what our clients are like. I don’t love quotas, but I think it’s important for people to understand that a diverse talent pool is going to come up with better answers.

The elephant in the room during the conversation with Johnson and other fund managers, analysts and bankers in recent months is Donald Trump and his tariffs crusade. The head of Franklin Templeton, whose salary topped $17 million last year, does not shy from the controversial topic. In past interviews, she has recalled how being the sixth of seven siblings taught her not to hide, in order for her voice to be heard. And far from joining the chorus of those criticizing the president’s policies, she sees in them a strategy that could well serve the country.

Q. What do you think of the new U.S. administration?

A. I think he’s got the right instincts on—you know, people call it a tax cut, but it is really a tax extension. If Congress doesn’t pass it, we’re going to have a massive increase in taxes in the United States, and that will slow the economy. I also think his instinct on tariffs is correct. I tend to prefer free trade, but post-World War II, there have been certain biases in the system and it’s probably time to correct. The United States has an open market. People can sell goods into the United States, where we can’t sell as freely into other markets. There has to be a more level playing field. The final thing is, U.S. governments tend to think in four-year cycles. We need to be thinking longer term. You look at a place like China, which is locking up core minerals and resources that are needed for technology. We need to be building strategies. That deal with Canada is about some of those core goods. Trump’s comments on Greenland, you know, are actually about trying to figure out sourcing some of those core minerals. It becomes a huge risk to the United States and other countries if China controls all those key minerals that are critical for the making of chips, the making of what ultimately becomes part of defense spending.

Q. Until now, the United States has been a predictable country that respected agreements and multilateralism. Now, the situation has changed. Do you fear that some flows of investment will leave the U.S. for more stable markets, like Europe for instance?

A. Europe has been the best performing market. Why? For various reasons, like its investments in defense, because the U.S. markets have been up 50% in the last two years… You haven’t seen the greatest innovation come out of Europe like you have in the United States. That’s not because there aren’t great entrepreneurs in Europe, it’s the way the capital markets are structured. Europe needs to take a real look at their regulations that are impairing some of the opportunity for growth. Capital goes where it’s treated well. Anywhere the markets and investment returns are the best, the capital is going to flow there. That’s about rule of law, governance, taxation, education and the entrepreneurial system.

Q. What is the greatest economic risk right now?

A. The U.S. deficit. It’s a concern because the United States has to get those treasuries funded, and there’s going to be a price to be able to bring people in to fund them. I’m not saying that there’s any risk to the U.S. dollar being a reserve currency, but the question is, at what price do they have to attract that investment to fund the treasuries?

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