Franklin Templeton Launches Income ETF Similar to Mutual Fund

Franklin Templeton launched a new actively managed income fund that will invest in a range of income-generating assets including bonds and dividend-generating stocks. 

After surpassing $15 billion in exchange-traded fund assets under management last month, the San Mateo, Calif.-based company is continuing its push into ETFs with the June 8 launch of the Franklin Income Focus ETF (INCM). Besides seeking income with bonds and dividend stocks, the fund is also using derivatives.  

Todd Brighton, one of the fund’s managers, says that the current rising rate environment presents a “broadening of opportunities” for a fund like INCM. 

“Real yield is there in traditional sources of income that wasn’t there for years,” he told etf.com in an interview. 

Among the fund’s 125 holdings, about 6% is allocated to treasuries and 2% to Chevron Corp. stock. Chevron pays 4.89% dividend yield, or $5.36 per share annually. 

In a departure from Franklin’s other funds, INCM carries a 0.38% expense ratio. That’s around half the average of 0.7% for active ETFs, is also well below 0.73% for a similar Franklin mutual fund, the Franklin Income Fund.  

Brighton said that despite the ETF sharing the Income Fund’s management and following a similar strategy, it’s not an “ETF clone” of the fund.  

Even though other firms have seen their lower priced offers draw investors away from similar investment products with higher prices, Brighton says he doesn’t think that will happen. He argues that because this is Franklin’s largest mutual fund and people have been familiar with it for decades they won’t switch. 

Regarding income investing, Brighton said: “the ability for traditional income to act as a ballast is back,” referring to how fixed-income can help provide diversification in a portfolio to help when stocks are down, something bonds have struggled with recently.  

While Franklin Templeton couldn’t divulge specifics, it did say that they have more actively-managed ETFs in the queue. 

Contact Gabe Alpert at [email protected]