Franklin Templeton launches two smart beta ETFs in Canada

Jan 30th, 2018 | By | Category: Equities

Franklin Templeton Investments Canada has launched two smart beta ETFs – the Franklin LibertyQT Global Dividend Index ETF (FLGD CN) and Franklin LibertyQT Emerging Markets Index ETF (FLEM CN) – on Toronto Stock Exchange. The funds respectively invest in global high-quality dividend-paying stocks and emerging market equities selected using a multifactor approach.

Duane Green, president and CEO, Franklin Templeton Investments Canada.

Duane Green, president and CEO, Franklin Templeton Investments Canada.

FLGD tracks the LibertyQ Global Dividend Index, which is composed of companies with strong quality attributes that are looking to sustain or grow dividends. The first step in the index’s methodology seeks to reduce the parent universe to dividend payers only, which is achieved by excluding stocks with any two year-over-year dividend reductions and those with less than five years’ dividend-per-share data.

The 100 stocks with the highest quality characteristics are selected for index inclusion by looking at return on equity, earnings variability, cash return on assets and, where appropriate, leverage. Constituents are weighted using a combination of their market cap and quality factor score. To ensure diversification and mitigate volatility, each security held in the ETF is capped at 2%.

The fund has a management expense ratio (MER) of 0.45%.

FLEM tracks the LibertyQ Emerging Markets Index. Using a multi-factor approach with a strong focus on quality, the index provides greater exposure to high-quality emerging market equities with reduced volatility. Stocks are rated and ranked based on a composite score derived from four fundamental characteristics: quality (50%), value (30%), momentum (10%) and low volatility (10%).

Roughly 25% of the highest rated stocks from the parent MSCI Emerging Markets Index are selected and weighted based on a combination of market capitalisation and composite factor score.

FLEM’s MER is 0.55%.

The new funds complement the firm’s existing smart beta ETFs in Canada – the Franklin LibertyQT US Equity Index ETF (FLUS CN) and Franklin LibertyQT International Equity Index ETF (FLDM CN). FLUS and FLDM follow a similar methodology to FLEM, utilizing a multifactor approach with a focus on quality.

“In building out our ETF platform, we are now offering advisors and investors smart beta ETFs that invest in global dividends and emerging market equities, providing a range of options to help diversify a Canadian-focused portfolio,” said Duane Green, president and CEO, Franklin Templeton Investments Canada.

Patrick O’Connor, global head of ETFs for Franklin Templeton Investments, added, “Adding these new ETFs to our global ETF platform reflects our ongoing commitment to developing best-in-class offerings that can serve as essential building blocks for a diversified portfolio. As we expand our global ETF platform, we have focused on bringing a variety of options to advisors and investors in Canada, which is a key market for our global ETF business.”

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