Markets can absorb current yields which are still ‘pretty normal’, says Franklin Templeton CEO

DESPITE the handwringing over higher 10-year Treasury yields, the current rates are “actually slightly below average” and represent an environment that “the markets can handle”, said Jenny Johnson, Franklin Templeton president and CEO.

Investors, however, “have to be thoughtful (and consider) where (they) are in the market”.

“There will be pockets of the market that built their businesses on a low-rate environment. I think private equity (PE) will struggle a bit on buyouts and exits, and if they are leveraged heavily.”

Since the 1950s, the long-term average 10-year US Treasury yield was around 5.52 per cent, with the average yield peaking at 13.9 per cent in 1981.

On Oct 7, 10-year yields hit a 24-year high of 5.34 per cent. It has since dropped to around 5.19 per cent.

“The market is still able to absorb current interest rates. Rates are not historically abnormal; they’re actually pretty normal,” said Johnson, who was in Singapore last week for the Milken and Forbes conferences.

Speaking to The Business Times, she added that she was, however, concerned about the level of US public debt.

“We’re in a booming economy. This is when you should be reducing the percentage of debt to gross domestic product. I don’t worry about the US being the reserve currency or about Treasury markets not being bought...

“I worry about the price it takes to buy them, and how much they crowd out other investments. In the long term, good access to good capital is going to be really important, and it’s going to get harder as you have to fund a lot of the debt.”

She remains optimistic about markets, but with some reservations on the Magnificent Seven stocks – Alphabet, Google, Amazon, Meta, Microsoft, Nvidia and Tesla – in which the risk proposition is “trickier” because of a “web of debt”.

“The US has high productivity, even while oil prices are higher. Seventy per cent of companies have beat their models on earnings, so there is a lot of strength,” she said.

“The consumer continues to be very strong, and we’re living in probably the greatest technological advances of my lifetime that are just beginning to show. Productivity numbers are still coming in, and that’s going to drive earnings...

“But I think the (Magnificent Seven) are trickier, because they’re going from capital-light businesses to capital-heavy. I think they’re starting to be very creative with their debt. Suppliers are becoming lenders now, and you have off-balance sheet debt that hyperscalers are guaranteeing,” Johnson said.

“If you’re a lender, you’d have to make sure to track all of it. If you’re on the short side of the curve on debt, that’s probably a pretty good investment because it’s less price sensitive.”

Franklin Templeton manages a total of US$1.8 trillion in assets.

It posted a strong set of financial results for the third quarter ended Jun 30, with US$18.4 billion in long-term net inflows in public and private assets. Fiscal year-to-date long-term net inflows came up to US$63.3 billion.

Its assets under management (AUM) includes US$294 billion in alternative assets.

Democratising access to private markets

Johnson said the company is committed to widening access to private assets among private-wealth and long-term retirement investors.

“Most of the world doesn’t have the luxury of putting money away for 12 years. That’s a luxury the wealthy has,” she said. “There is an excess premium in illiquid assets, and we’re trying to figure out creative ways to bring those assets to our clients in a more liquid form by creating hybrid products...

“My grandfather got into the mutual fund business because the average person was left out of the stock markets at the time, and someone came up with the idea of creating a mutual investment product where you got diversification, expert analyses and investment capabilities at a very reasonable price...

“I think the same moments exists today around private markets. Too many people have been left out of the excess returns of private markets. We’re committed to bringing that to more people responsibly, which means packaging it correctly with the right amount of liquidity appropriate for the retail investor.”

Johnson is the granddaughter of Rupert Johnson Sr, who founded the company in 1947. She became president and CEO in 2020 after 30 years with the company.

She believes private assets have a place in retirement savings, with people investing regularly over a long horizon and not needing to draw on the funds.

The current liquidity crunch in private credit, where some funds have imposed limits on redemptions, partly reflects inadequate investor education on the semi-liquid vehicle.

Evergreen funds’ liquidity window of typically 5 per cent each quarter should be positioned as a product feature that works to investors’ benefit, she said.

“What hurts is if there is selling pressure where the manager has to sell good assets at fire-sale prices, because they committed to allow more than 5 per cent withdrawals...

“If you allow more than that, then chances are you’re actually reducing returns. The key is education. We’re a big believer in financial advisers, and we want to make sure clients have the benefit of advisers who are sophisticated. Managing money is not a part-time job; it’s great to have an adviser to help you structure your portfolio for whatever your needs are.”

The firm has a series of evergreen funds under Franklin Templeton Private Markets, the assets of which have reached US$8.9 billion in its subsidiaries Lexington Partners, Benefit Street Partners and Clarion Partners.

In 2025, it rolled out its first evergreen PE secondaries strategy, co-managed with Lexington Partners, a pioneer in PE secondaries and co-investment funds.

The fund surpassed US$1.2 billion in international AUM as at September 2025, with Asian investors accounting for a substantial share of subscriptions.

The strategy has hit US$3.5 billion in total assets as at February 2026, due to global demand from private-wealth clients.