Franklin Templeton launches LibertyShares Strategic Beta ETFs in Canada

Jun 7th, 2017 | By | Category: Equities

ETF STRATEGY NEWS! ETF Strategy is delighted to announce the launch of ETF Strategy Hub (hub.etfstrategy.com), an on-demand repository of webcasts, videos, podcasts and white papers. Debuting with Special Series on Technology & Innovation in China and the Digital Economy.


The Canadian ETF platform of Californian asset manager Franklin Templeton Investments has introduced two new Franklin LibertyShares strategic beta ETFs on Toronto Stock Exchange. The Franklin LibertyQT US Equity Index ETF (FLUS) and the Franklin LibertyQT International Equity Index ETF (FLDM) invests in US and international equities respectively while enhancing exposure to quality, value, momentum and low volatility factors.

Franklin Templeton launches LibertyShares Strategic Beta ETFs in Canada

The LibertyShares strategic beta ETFs provide enhanced exposure to quality, value, momentum and low volatility factors.

“Our Franklin LibertyQT strategic beta ETFs will provide Canadian investors with US and international equity options for their portfolios,” said Duane Green, president and CEO of Franklin Templeton Investments Canada. “Our dedicated team of specialized ETF experts applies research-driven insights to traditional index investing to pursue specific investment outcomes via these new strategic beta ETF offerings.”

Each fund tracks a proprietary, research-driven index, targeting exposure across four factors which have historically provided superior returns to market cap-weighted benchmarks over the long-term. Franklin Templeton believes certain factors play a more significant role over others in driving long-term out-performance and has thus assigned a varied weighting across the factors of quality (50%), value (30%), momentum (10%) and low volatility (10%).

The LibertyQ index methodology assigns each security within the parent index four z-scores, each representing that firm’s relative position in one of the above factors. Z-scores are capped at maximum and minimum values of +3 and -3 respectively. The quality z-score is determined through an analysis of return on equity, earnings variability, and cash return on assets; the value z-score is determined through an analysis of price-to-book ratios and dividend yields, the momentum z-score is determined through an analysis of 6-month risk-adjusted price momentum and 12-month risk-adjusted price momentum, and the volatility z-score is determined through analysis of the variability of return over the previous 104 weeks.

The four z-scores are thereby combined according to the above weightings to arrive at a composite z-score for each firm. All constituents are ranked in descending order according to their composite scores.

FLUS tracks the LibertyQ US Large Cap Equity Index which is derived from its parent, the Russell 1000 Index. The fund currently has 250 holdings with significant exposure to the information technology (19.9%), consumer discretionary (17.9%), consumer staples (17.7%) and industrials (15.5%) sectors. It has a management expense ratio of 0.25%.

FLDM tracks the LibertyQ International Equity Index which offers international developed markets exposure and seeks to achieve higher risk-adjusted returns than the MSCI EAFE Index. The fund currently has 250 holdings and the largest country exposures are to the UK (28.6%), Japan (20.6%), Australia (16.7%), Switzerland (7.5%) and France (4.1%). The largest sector exposures are in financials (17.9%), consumer discretionary (17.1%), consumer staples (15.2%), healthcare (14.5%) and industrials (9.1%). It has a management expense ratio of 0.40%.

“Our multi-factor approach to strategic beta ETFs has the potential to increase returns and reduce risk over the long term relative to a market capitalization weighted approach, as different factors outperform at various stages of the market cycle,” said Patrick O’Connor, head of Global ETFs for Franklin Templeton Investments. “Our expert quantitative team has identified four well-established factors, applying a custom mix with an emphasis on quality and value, which has the potential to help drive attractive returns, while seeking a degree of downside protection.”

Tags: , , , , , , ,

Leave a Comment