Franklin Templeton’s Jenny Johnson on Bitcoin ETFs, investing in crypto, and how her firm is harnessing the blockchain
At the Fortune Global Forum Nov. 27–29 in Abu Dhabi, I had a chance to talk with Jenny Johnson, the president and CEO of Franklin Templeton, which has grown from a small brokerage founded in 1947 to a global giant that now manages over $1.3 trillion.
Among the top financial firms, Franklin Templeton has been at the forefront of exploring blockchain technology. In 2021, it launched the first U.S.-registered mutual fund to use a public blockchain to process and record transactions, as well as crypto-focused separately managed accounts, or SMAs. And in September, the firm filed an application for a Bitcoin ETF.
In our conversation, Johnson discusses a variety of topics, including the role blockchain will play in her firm’s long-term success and how it will help democratize markets.
This interview has been edited for length and clarity.
Franklin Templeton has been actively exploring blockchain technology, recently filing an application for its Franklin Bitcoin ETF. Could you elaborate a bit on how blockchain fits into your long-term strategy?
I think it’s important that we differentiate Bitcoin and blockchain. I think that there’s a demand for Bitcoin. It has its own use case, and that’s why you’re seeing these ETFs. What gets me more excited, as I think about the future, you look at blockchain technology, and it’s going to enable access to things like private markets. It’s going to enable the democratization of private markets. Well, why does it do that? This is because the technology takes out the frictional costs associated with processing transactions. And if you can reduce the friction in transactions, then you can more easily securitize or fractionalize ownership of things that would have been operationally too difficult to consider. Instead, you’re able to create and transfer ownership of these hard-to-process assets much easier.
It’s going to unlock nontraditional, non-correlated types of asset classes that are going to be interesting for our clients. We also think that it’s going to make more efficient the types of products that you have today. ETFs trade all day, but only price twice a day. So, imagine that you build a pooled vehicle on the blockchain. When you transact, you can have the smart contract tell you exactly what the underlying value of those securities is. It’s just a much more efficient way to be able to operate.
And when you have atomic settlement or you have immediate settlement, it removes the potential for fraud, it takes out latency in the system. It’s going to be all about efficiency. At Franklin Templeton, we developed a tokenized money-market fund. We built a shareholder recordkeeping system on that. We are a node validator, we actually advise on different portfolios. We have passive portfolios and active portfolios. While these are all in their early stages, they demonstrate that we’re big believers in this space.
When do you think the first Bitcoin spot ETF will be approved?
I don’t know. That’s in the hands of the regulators, as they’re trying to figure out the best approach. Their job is to protect the consumers, and I think they’ll do it in time, as appropriate.
Have you seen significant interest from clients for a Bitcoin spot ETF? Do you expect an influx of funds after it is approved?
I think there’s obviously a demand for Bitcoin, and I believe a spot ETF is a better way to access Bitcoin. As long as they trade, the bid-ask is narrow, it should be a better way to do it. It’s a much more convenient way for anybody interested in investing in Bitcoin.
But I think Bitcoin has some challenges. It’s hard to anchor to any kind of investment thesis. It tends to be a risk-on/risk-off type of asset. You just want to make sure clients are responsible in how they allocate Bitcoin.
How did you first discover blockchain and crypto?
I ran the technology division years ago at Franklin Templeton. So I’m always staying focused on new technological trends. This was one that I thought initially would take longer to mature, but I’ve been impressed to see the various platforms and how quickly they’ve matured, and the innovation that’s happened in various companies that are being created on these layer-1s. But it was just because I spent about a third of my time on disruptive technologies, and it was one, just like AI, that I paid attention to.
Do you personally invest in cryptocurrency?
I do have some investments. It’s small for my overall portfolio, but I definitely have investments there.
Can you share some of your picks?
Well, I haven’t had more picks. They’re all standard: Ethereum, a little Bitcoin, SushiSwap, Uniswap. I have a couple of different things like that.
Looking ahead, do you plan to launch other blockchain- or crypto-related products? Some other wealth managers have, for example, crypto indexes or retirement plans or futures ETFs.
ETFs don’t tend to be big in the retirement channel, but they may. Retirement plans have fiduciaries that make the decision about what investments are on there. So that would be the choice of the fiduciary. Our job is to make the products available.
You’ve had big success with your U.S. money-market fund, which is tokenized and has inflows of over $ 270 million. Do you plan to tokenize any other funds?
As I mentioned earlier, I think that technology is a really great opportunity. And as it matures, there’ll be more investment opportunities. I always say, at Franklin Templeton, our expertise is in making active, risk-adjusted investment decisions, and we deliver them in whatever vehicle our clients would like us to deliver them. Blockchain creates one type of vehicle with tokenization, and so, yes, we do see it as a channel to ultimately be able to deliver our expertise.
Franklin Templeton ventured into the world of NFTs by issuing some to attendees of your first Innovation Forum last year. What use cases do you see for NFTs, and how do you feel about them personally?
Look, I think as in anything, there’s mature investments that make a lot of sense. And then there’s a lot that don’t make any sense. I tend to make investments in things that I think are anchored in having financial returns, because I think that you have better chances of success there. There are some things that are like art in an NFT, where if two people love it, they will find a market price for it. And so, there’s going to be opportunities in that space. Not all will be successful, not all will be good, but there will be some that are successful.