Franklin’s MINT Clone ETF Nears Launch

August 05, 2013

Franklin Templeton’s active short-term bond fund looks like it may be closer to launching.


Franklin Templeton filed an updated prospectus on its actively managed Franklin Short Duration U.S. Government ETF detailing a price tag, which suggests that launch is nearing for the mutual fund firm’s first exchange-traded fund that it put into registration a bit more than a year ago.

The initial filing came just three months after Bill Gross’ active bond strategy, the Pimco Total Return ETF (NYSEArca: BOND) rolled out. BOND, the most successful actively managed ETF to date, opened the door for other active bond funds like the Franklin Short Duration U.S. Government fund to enter into the ETF universe.

A number of mutual fund firms have put actively managed short-dated bond funds into registration since BOND came to market on March 1, 2012, including Legg Mason. It looks like Franklin Templeton’s may well be the next to market as mutual fund firms look for ways to address investor needs with active strategies. Apart from BOND and a few other fixed-income ETFs, active ETFs have yet to really take off.

The Franklin Short Duration U.S. Government ETF, an actively managed strategy, will invest in U.S. government debt with duration of no more than three years, the San Mateo, Calif.-based mutual fund firm said in the filing. The fund’s prospectus mentioned that a substantial portion of the assets would be mortgage-backed securities, although it may also invest in direct obligations of the U.S. government such as Treasury bonds, bills and notes.

To pursue its investment goal of achieving “a high level of current income as is consistent with prudent investing, while seeking preservation of capital,” the fund may utilize interest-rate-related derivative transactions to hedge risk by allowing the fund to gain long or short exposure to certain interest rates or durations, the prospectus said.

After a 16 basis point (bps) fee waiver, the Franklin Short Duration U.S. Government ETF will cost 30 bps, or $30 per $10,000 invested in the fund.

While it will be listed on the New York Stock Exchange’s electronic trading platform, Arca, the fund does not yet have a ticker.


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