Franklin Templeton launches two actively managed Canadian fixed income ETFs

Jul 8th, 2019 | By | Category: Fixed Income

Franklin Templeton Canada has launched two actively managed fixed income ETFs on Toronto Stock Exchange.

Franklin Templeton active fixed income ETFs

Franklin Templeton celebrated the launch of the new funds by taking part in a market opening ceremony at Toronto Stock Exchange on 8 July 2019.

The Franklin Liberty Core Plus Bond ETF (FLCP CN) and Franklin Liberty Short Duration Bond ETF (FLSD CN) seek to provide moderate to high income while preserving capital by investing in a range of Canadian fixed income securities.

Eligible securities including federal and provincial government and corporate bonds, debentures and short-term notes.

The funds differ in their duration profiles – the Core Plus ETF invests over the entire yield curve, while the Short Duration ETF targets portfolio duration of 3.5 years or lower.

Each fund may invest up to 40% of its assets in high-yield bonds and up to 30% in foreign securities, including those from emerging market issuers.

The prospectus notes each fund may also invest a small portion in preferred shares and dividend-paying equities from Canadian companies, and they may also use derivatives as well as other fixed income ETFs to gain their exposures.

The Franklin Liberty Core Plus Bond ETF comes with a management expense ratio (MER) of 0.55%, while the Franklin Liberty Short Duration Bond ETF costs 0.40%.

The ETFs gain their exposure primarily by investing directly in Franklin Bissett mutual funds. Franklin Bissett’s fixed income team oversees approximately C$6 billion in assets under management.

“Investors are looking for actively managed fixed income to provide stability in their portfolios,” said Duane Green, President, and CEO, Franklin Templeton Canada. “Now they can access the compelling, risk-adjusted returns of our Franklin Bissett fixed income mutual funds in either an ETF or mutual fund structure depending on what works best for their portfolio.”

Investors can gain cheaper access to Canadian aggregate bond exposures through passive ETFs. For example, the Vanguard Canadian Aggregate Bond Index ETF (VAB CN) and Vanguard Canadian Short-Term Bond Index ETF (VSB CN) come with MERS of just 0.10% and 0.11%, respectively.

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