Turmoil Shakes Up Even the Biggest Fund Managers

In these rocky times, even the most respected names in the money management business are being devalued.

Franklin Resources Inc., the biggest U.S. fund manager by market value and the only money management stock in the Standard & Poor’s 500 index of blue chips, has lost almost $8 billion in market capitalization since mid-April.

The San Mateo, Calif.-based company has suffered more than other money management firms, its shares plunging 45% since the market peak July 17--compared with the S&P;’s drop of almost 18%--and 54% from their 52-week high.

Merrill Lynch Corp. shares have slid 44% from their 52-week high, while T. Rowe Price Associates Inc. stock is off 34% from its peak.

Franklin shares fell again on Friday, by $3.13, to close at $26.88 on the New York Stock Exchange--with volume more than three times the recent daily average.

“This is way overdone,” said portfolio manager Thomas Goggins of the John Hancock Financial Industries Fund, which owned 678,000 Franklin shares as of April 30, calling it “probably the premier bond manager in the country.”

Still, analysts once almost uniformly enthusiastic about Franklin’s prospects have become more skeptical about its outlook.

Steven Eisman of CIBC Oppenheimer Corp., for example, cut his rating on Franklin to “hold” from “strong buy.”

As the share price has dropped, Franklin has been more active in buying back shares than in recent quarters, said Bijan Modanlou, investor relations chief. He declined to quantify the buyback program, however.

“I’m happy” Franklin is buying back some of its shares, Goggins said. He called T. Rowe Price and Franklin “the premier” publicly traded money management stocks.

“People will still buy mutual funds despite the recent carnage,” said analyst James Hanbury of Schroder & Co., who took Franklin off his company’s “buy list” in the spring but still rates the stock “attractive.”