Franklin Debuts Active Muni Funds

Today Franklin Templeton Investments launched two ETFs that cover the municipal bond space. The Franklin Liberty Intermediate Municipal Opportunities ETF (FLMI) and the Franklin Liberty Municipal Bond ETF (FLMB) are both actively managed, and come with expense ratios of 0.30%.

The pair of funds is listed on the NYSE Arca exchange.

In a press release, the firm said the funds look to offer investors a high level of tax-exempt current income.

Yield Exempt From Fed Taxes

“Leveraging Franklin Templeton’s world class municipal bond platform with more than $71 billion in assets under management, these actively managed ETFs seek to generate yield exempt from federal taxes, allowing investors to keep more of what they earn,” said Patrick O’Connor, Franklin Templeton’s head of global ETFs, who also noted the firm has seen a surge of client interest in fixed-income ETFs. 

The main differences between the two funds are the maturity ranges they target and the credit ratings of their underlying securities, the press release said. While FLMI will look to invest in investment-grade and below-investment-grade municipal debt and target a dollar-weighted average portfolio maturity of three to 10 years, FLMB will focus on higher credit ratings and longer maturity terms.

Specifically, FLMB selects its holdings the top four credit rating tiers and aims for a dollar-weighted average portfolio maturity of five to 15 years.   

The prospectus notes that both funds seek to find “the best balance between risk and return” in its portfolio, while implementing a buy-and-hold strategy.

Flurry Of Funds

Prior to these launches, only three municipal bond ETFs have rolled out this year. They’ve been coming out in drips and drabs ever since 2007, which saw a flurry of such funds enter the market. Ten of those ETFs are still trading today, including the largest muni ETF in existence, the nearly $9 billion iShares National Muni Bond ETF (MUB). Of the 37 municipal bond ETFs currently trading, nine are actively managed.

These are the first municipal bond ETFs for Franklin Templeton, which has two other actively managed bond ETFs currently trading. The Franklin Liberty Short Duration U.S. Government ETF (FTSD) was the first ETF launched by the firm, and is currently its second-largest fund, at $152 million in assets.

Elkhorn Closing Midcap Funds

Elkhorn Investments, which made news recently due to its acquisition by Turner Investments, will be shutting down its nine midcap sector ETFs.

The nine funds, which complement the original nine Select Sector SPDR ETFs that track the key sectors of the S&P 500, launched in 2016, but never gathered much in the way of assets. Derived from the sectors of the S&P Midcap 400 Index, the ETFs each have less than $1 million in assets under management.

Given the massive size of the multibillion-dollar Select Sector SPDRs, the failure of Elkhorn’s midcap sector ETFs is a bit puzzling. There are no other midcap-focused sector funds. The list includes the following:

• Elkhorn S&P MidCap Consumer Discretionary Portfolio (XD)
• Elkhorn S&P MidCap Energy Portfolio (XE)
• Elkhorn S&P MidCap Financial Portfolio (XF)
• Elkhorn S&P MidCap Health Care Portfolio (XH)
• Elkhorn S&P MidCap Industrials Portfolio (XI)
• Elkhorn S&P MidCap Information Technology Portfolio (XK)
• Elkhorn S&P MidCap Materials Portfolio (XM)
• Elkhorn S&P MidCap Consumer Staples Portfolio (XS)
• Elkhorn S&P MidCap Utilities Portfolio (XU)

Roughly 70 ETFs have shut down so far this year. The nine Elkhorn funds are set to see their last day of trading on Sept. 14.

Contact Heather Bell at [email protected].