Franklin Templeton launches actively managed short duration US government bond ETF

Nov 7th, 2013 | By | Category: Fixed Income

Franklin Templeton has launched its first exchange-traded fund, the actively managed Franklin Short Duration US Government ETF (FTSD).

Franklin Templeton launches actively managed short-duration US government bond ETF

Franklin Templeton’s debut ETF invests in short-duration bonds issued by the US government.

Listed on the NYSE Arca, the fund seeks a high level of current income and preservation of capital by following a short duration US government portfolio strategy.

The fund is designed for investors who are income focused while also looking to achieve lower volatility than intermediate and longer-duration strategies. It is also designed for investors looking for a portfolio free from corporate credit risk.

Roger Bayston, CFA, the fund’s lead portfolio manager and senior vice president of Franklin Templeton Fixed Income Group, said: “With Franklin Short Duration US Government ETF, we are taking a yield-driven approach and investing where we see the most attractive short-term yield potential across various US government bond sectors, including higher yielding MBS (Mortgage-Backed Securities), ARMS (Adjustable Rate Mortgage Securities) and TIPS (Treasury Inflation-Protected Securities).”

He added: “This actively managed ETF can take advantage of opportunities outside of the [benchmark] index (Barclays US Government 1-3 Year Index), which has a much narrower opportunity set. The fund may be attractive to risk-averse investors who seek monthly income potential and relative price stability across changing interest rate environments, and do not want exposure to corporate credit cycles.”

Under normal market conditions, the fund will invest at least 80% of its net assets in securities issued or guaranteed by the US government, its agencies or instrumentalities, including government-sponsored entities. The fund generally will invest a substantial portion of its assets in mortgage-backed securities including ARMS, but the fund will also invest in direct obligations of the US government (such as Treasury bonds, bills and notes). The fund may also invest in US inflation-indexed securities issued by the US government.

Peter Jones, president of Franklin Templeton Distributors, commented: “As a firm, we continue to focus on traditional active fund management and seek to provide attractive long-term returns for our clients. The vehicles in which we have offered our strategies have evolved and expanded over time, and the introduction of Franklin Short Duration US Government ETF represents our first foray into actively managed ETFs.”

The fund’s portfolio managers, Roger Bayston and Patrick Klein, PhD, are supported by the analysis and insights of the Franklin Templeton Fixed Income Group, which consists of over 150 investment professionals with an average of more than 15 years of industry experience. Franklin Templeton has been managing US government bond funds since 1947.

As an ETF vehicle, this product will offer daily portfolio transparency and intra-day trading. It has a net expense ratio of 0.30%.

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