Franklin Debuts 3 Multifactor Funds

Franklin Templeton has expanded its lineup of U.S. ETFs with the addition of three multifactor funds. The three ETFs debuted on Friday and fill in a largely neglected space in the firm’s offering, which has tilted heavily toward international equities and actively managed fixed-income strategies.

The funds are listed on the Bats exchange, which is owned by ETF.com’s parent company, CBOE. The new ETFs and their expense ratios are as follows:

• Franklin LibertyQ U.S. Equity ETF (FLQL), 0.25%
• Franklin LibertyQ U.S. Mid Cap Equity ETF (FLQM), 0.30%
• Franklin LibertyQ U.S. Small Cap Equity ETF (FLQS), 0.35%

The three funds target the same factors as Franklin’s international multifactor funds: quality, value, momentum and low volatility. The underlying indexes are all derived from subindexes of the Russell 3000, with components selected from the universe based on their favorable exposure to the four targeted factors. Individual components are capped at 1% weightings in the indexes.

Interestingly, there could be significant overlap between FLQM and FLQL’s exposures. FLQM’s index is derived from the Russell Midcap Index, while FLQL’s index is derived from the Russell 1000. The Russell Midcap Index represents the 800 smallest stocks in the Russell 1000, which suggests FLQM’s components are a subset of those held by FLQL.

Although none of the funds approach the low cost of the Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF (GSLC), which has an expense ratio of 0.09%, the new Franklin ETFs are priced competitively among multifactor ETFs. FLQL, in particular, undercuts the expense ratios charged by multifactor large-cap funds from several competitors.

The launches bring the number of ETFs offered by Franklin Templeton to 11 and further build out its multifactor “LibertyQ” offering.

Contact Heather Bell at [email protected].