Franklin Templeton cross-lists smart beta ETF suite into Italy

Feb 1st, 2018 | By | Category: ETF and Index News

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Franklin Templeton has continued its expansion into Europe by cross-listing its five recently launched European domiciled UCITS ‘LibertyShares’ ETFs onto Italy’s Borsa Italiana.

Patrick O’Connor, global head of ETFs at Franklin Templeton Investments.

Patrick O’Connor, global head of ETFs at Franklin Templeton Investments.

The range includes three multi-factor ETFs providing global, US and emerging markets exposure, and a pair of quality dividend ETFs targeting global and European equities.

Patrick O’Connor, global head of ETFs for Franklin Templeton, commented, “LibertyShares was launched in 2016 in the United States. Since then, we have expanded our offer globally, introducing ETFs in Europe and Canada. Our commitment is to be one of the leaders in providing ETF solutions to customers all over the world.

“Italy has always been a strategic market for us in Europe. Therefore, the fact we listed the range of Franklin LibertyQ Smart Beta UCITS ETFs on Borsa Italiana – being the fourth most active European market in terms of trading – constitutes a fundamental step towards our aim of creating a global ETF platform.”

Silvia Bosoni, head of ETF, ETP and open funds of Borsa Italiana, added, “Franklin Templeton has recognized the strategic role of the Italian market in the ETF sector and has decided to offer investors a range of highly innovative instruments. The ETFplus market, which is continuing to live an important moment of growth, is increasingly positioning itself as a global, efficient and transparent platform.”

The ETFs are all based on proprietary in-house indices. The multi-factor indices seek exposure to four factors (quality, value, momentum and low volatility), while the dividend-focused indices seek exposure to securities with high and persistent dividend income along with superior quality characteristics.

Multi-factor ETFs

The methodology of the multi-factor indices starts with all stocks in each of the indices’ parent universe being given a composite score based on their exposure to the four single factors, with a 50% weight given to quality, 30% to value and 10% each to momentum and low volatility. A broadly diversified collection of stocks with the highest composite factor scores are selected to become index constituents and are weighted based on a combination of market capitalisation and composite factor score.

The Franklin LibertyQ Global Equity SRI UCITS ETF (FLXG IM) tracks the LibertyQ Global Equity SRI Index, which is based on the MSCI ACWI SRI universe of large and mid-cap stocks across developed and emerging market countries. In addition to accessing the premia associated with the multi-factor approach, the index also seeks exposure to companies with strong sustainability profiles. The index currently has 234 constituents. The largest country weightings are the US (43.3%), Japan (8.8%), the UK (6.5%), Australia (6.1%) and Canada (6.0%). The largest sector exposures are financials (16.4%), consumer discretionary (14.5%), information technology (13.3%), industrials (12.5%) and health care (11.9%). Its total expense ratio (TER) is 0.40%.

The Franklin LibertyQ US Equity UCITS ETF (FLXU IM) tracks the LibertyQ US Large Cap Equity Index, which is based on the Russell 1000 universe of US large-cap stocks. The index currently has 251 constituents. The largest sector exposures are industrials (19.5%), consumer services (18.4%), consumer goods (17.6%) and technology (15.5%). Its TER is 0.25%.

The Franklin Templeton LibertyQ Emerging Markets UCITS ETF (FLXE IM) tracks the LibertyQ Emerging Markets Index. The currently 201 index constituents are selected from the MSCI Emerging Markets Index. The largest country exposures are South Korea (15.4%), China (13.9%), India (13.0%), Taiwan (12.8%) and Russia (10.8%). The largest sector exposures are information technology (19.7%), consumer discretionary (14.1%), energy (13.3%) and consumer staples (11.6%). Its TER is 0.55%.

Quality dividend ETFs

The quality dividend indices seek, within their respective regions, exposure to securities with high and persistent dividend income along with superior quality characteristics. They do this by excluding stocks with any two year-over-year dividend reductions and those with less than five years’ dividend-per-share data, and by looking at return on equity, earnings variability, cash return on assets and, where appropriate, leverage.

The Franklin LibertyQ Global Dividend UCITS ETF (FLXX IM) tracks the LibertyQ Global Dividend Index, which is based on the MSCI ACWI ex REITs universe of large- and mid-cap stocks across developed and emerging market countries. The index currently has 100 constituents. The largest country weightings are the US (37.7%), Australia (9.1%), Canada (8.7%) and the UK (8.6%). The largest sector exposures are financials (23.4%), consumer staples (21.3%) and health care (13.7%). Its TER is 0.45%.

The Franklin LibertyQ European Dividend UCITS ETF (FLXD IM) (TER 0.25%) tracks the LibertyQ European Dividend Index, which is based on the MSCI Europe IMI universe of large-, mid- and small- cap stocks across developed market countries in Europe. The index currently has 50 constituents. The largest country weightings are the UK (35.1%), Germany (13.2%) and Sweden (12.0%). The largest sector exposures are financials (33.7%), telecommunications (16.7%) and utilities (14.6%). Its TER is 0.25%.

Four of the five ETFs made their European debut on London Stock Exchange and Deutsche Börse in September 2017, with the EM ETF following a month later.

Following the listings, Franklin Templeton becomes the seventeenth ETF issuer to launch on Borsa Italiana’s ETFplus platform which now hosts a total of 795 ETFs.

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