By ETF Heat Map Team
Recently, Franklin Templeton announced the release of two new actively managed ETFs, as part of their Frank LibertyShares platform, that had previously offered only 5 ETFs. The two new actively managed ETFs are the equity based Franklin Liberty U.S. Low Volatility ETF and the fixed income based Franklin Liberty Investment Grade Corporate ETF, which are listed as FLLV and FLCO, respectively. These ETFs come almost three years after Franklin Templeton launched their first actively managed products back in 2013, when they launched the Franklin Liberty Short Duration U.S. Government, which is listed as FTSD. FLLV and FLCO will have net expense ratios of 0.50% and 0.40%, respectively.
Patrick O’Connor, global head of ETFs for Franklin Templeton Investments, commented on the new launch by saying, “We are pleased to reach another milestone by introducing our new suite of actively managed ETFs. Investors have embraced the ETF wrapper for its benefits, which may include liquidity, tax efficiency and transparency. Now they want the opportunity to seek better risk-adjusted returns over the long term. Through Franklin LibertyShares, we are providing investors with simple and efficient options to help them address their desired outcomes. Our actively managed ETFs can help investors meet their investment needs by serving as a core or complementary portfolio holding.”
- The Franklin Liberty U.S. Low Volatility ETF (FLLV) – As measured by the Russell 1000 index, the fund looks for equities that showcase a strong potential for capital appreciation with an focus on lower volatility than the broader U.S. equity market. The fund utilizes a fundamental “bottom-up” research approach to security selection.
- The Franklin Liberty Investment Grade Corporate ETF (FLCO) – Utilizes prudent investing to deliver a high level of current income. The fixed income ETF seeks preservation of capital by investing at least 80% of its net assets in investment grade debt securities and investments.
Actively managed ETFs, such the ones offered by Franklin Templeton Investments, have a benchmark index. Unlike passive vanilla ETFs, which either aim to replicate specific index performance or have a hard prospectus investment mandate without active management oversight, actively managed ETFs are fairly different in how the operate. Actively managed ETFs give their fund manager or management team greater discretion and more freedom especially when it comes to asset allocation, in attempts to drive the best performance for the fund over time. Passive ETFs do not give their managers this flexibility.
J.P. Morgan also recently entered the active ETF territory, and launched its’ first actively managed ETF know as the JPMorgan Diversified Alternatives ETF which is listed as JPHF. The fund has listed net expenses to be 0.85% after fee waivers and expense reimbursements.
JPHF is managed by Dr. Yazann Romahi, PhD, CFA, using a, “rules-based, bottom-up approach to build a diversified portfolio of hedge fund strategies in a cost-effective manner.” The diversified alternative investments ETF provides diversified exposure to investors by “allocating across a variety of strategies commonly employed by hedge funds, including equity long/short, event driven and global macro.”
Active ETFs, or actively managed ETFs, currently represent a very small portion of the larger ETF universe. The future growth and popularity of active funds will be determined by their performance, and any additional potential convenience or flexibility an actively managed ETFs might offer investors over passive ETFs.