Franklin Templeton launches actively managed ultra-short bond ETF

Jul 19th, 2020 | By | Category: Fixed Income

Franklin Templeton Investments has expanded its range of actively managed fixed income ETFs with the launch of a multi-sector, ultra-short bond fund.

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

Patrick O’Connor, Global Head of ETFs at Franklin Templeton Investments.

The Franklin Liberty Ultra Short Bond ETF (FLUD US) has listed on NYSE Arca and comes with an expense ratio of 0.15%.

It is managed by the firm’s fixed income division which oversees more than $4.3 billion in active ETF strategies.

The fund aims to provide a high level of current income with limited volatility.

To achieve this objective, the fund targets a portfolio duration of less than one year and may utilize various interest rate-related derivatives.

Income is distributed to investors on a monthly basis.

The fund invests in investment-grade US dollar-denominated securities from issuers around the world and holds a substantial portion of its assets in cash, cash equivalents, and high-quality money market securities including commercial paper, certificates of deposit, repurchase agreements, and affiliated or unaffiliated money market funds.

Other eligible investments include government and corporate debt, mortgage- and asset-backed securities, and municipal bonds.

Sector allocation and security selection are the primary generators of alpha with the portfolio managers combining a top-down analysis of macroeconomic trends with a bottom-up fundamental analysis of market sectors, industries, and issuers. Proprietary quantitative models are used to help identify investment opportunities.

Patrick O’Connor, Global Head of ETFs for Franklin Templeton, commented, “As a multi-sector fund, concentrated in financials-related industries, FLUD provides investors with diversification in the ultra-short investment category and seeks a higher yield potential than traditional cash investments with limited additional risks.

“Franklin Templeton is once again delivering its time-tested expertise in active fixed income management through this very competitively priced, low-cost ETF. FLUD leverages our unique approach of blending top-down macroeconomic views, bottom-up fundamental research, and proprietary, quantitative analysis.”

The fund will compete with a range of rival multi-sector ultra-short bond ETFs. The largest of these are the $13.0bn JPMorgan Ultra-Short Income ETF (JPST US), the $4.0bn iShares Ultra Short-Term Bond ETF (ICSH US), and the $3.2bn Goldman Sachs Access Treasury 0-1 Year ETF (GBIL US).

These funds come with broadly equally competitive expense ratios of 0.18%, 0.08%, and 0.12%, respectively.

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