Daily ETF Watch: The Next Smart Beta Player

Franklin Templeton plans smart-beta ETFs.

Reviewed by: Heather Bell
Edited by: Heather Bell

Yet another traditionally active mutual fund shop is looking to join the ranks of its peers who have entered the ETF space via smart-beta funds. Franklin Templeton has filed for four index-based funds, three of which will target the same selection of factors, while the fourth will use a dividend investment approach.

The three multifactor funds will track indexes carrying the Franklin brand name. Each will cover different regions but target the same four factors: quality, value, momentum and low volatility. All three underlying indexes are derived from existing MSCI indexes, and set the weighting cap on any individual component at 2%. The funds and their benchmark’s parent indexes are as follows:

  • Franklin LibertyQ International Equity Hedged ETF, which will track an index derived from the MSCI EAFE
  • Franklin LibertyQ Emerging Markets ETF, which will track an index derived from the MSCI Emerging Markets
  • Franklin LibertyQ Global Equity ETF, which will track an index derived from the MSCI ACWI

The first of those three funds will have a currency hedge, while the other two will not.

Meanwhile, the Franklin LibertyQ Global Dividend ETF will also target two factors; namely, the growth and sustainability of dividends and quality. Its underlying index is based on the MSCI ACWI ex REITs, and like the other underlying indexes, puts a 2% cap on individual company weightings.

By planning the launch of multifactor smart-beta ETFs, Franklin Templeton seems to be following the same path as firms like John Hancock, J.P. Morgan and Goldman Sachs.

The new filing did not include tickers or expense ratios, but it did indicate the funds would list on the NYSE Arca exchange.

Contact Heather Bell at [email protected].

Heather Bell is a former managing editor of etf.com. She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.