Franklin Templeton lists three actively managed fixed income ETFs

Jun 4th, 2018 | By | Category: Fixed Income

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Franklin Templeton Investments has launched three new actively managed fixed income ETFs on Cboe BZX Exchange – the Franklin Liberty Senior Loan ETF (FLBL US), Franklin Liberty High Yield Corporate ETF (FLHY US) and Franklin International Aggregate Bond ETF (FLIA US).

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

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

FLBL seeks to provide a high level of current income with a secondary goal of preservation of capital. The fund will invest at least 80% of its assets in income-producing senior loans including leveraged loans, bank loans, floating rate loans, and collateralized debt obligations.

The prospectus notes that most of the portfolio will be invested in US-dollar denominated securities. Senior loans from non-US issuers may not account for more than a quarter of the total portfolio value.

The strategy includes the management team’s own credit analysis of issuers, taking into account such factors as industry, level of assets, debt outstanding, and creditworthiness.

The fund has a net expense ratio of 0.45% due to a contractual fee waiver in place until at least the end of July 2019. Its gross expense ratio is 0.81%.

FLHY also seeks to provide a high level of current income with a secondary goal of capital appreciation. The fund will invest at least 80% of its assets in high yield corporate debt securities such as bank loans, corporate debt, debentures, senior loans, convertible securities and subordinated debt.

The team behind the strategy employs a bottom-up approach to security evaluation and has the freedom to invest in high yield assets denominated in any currency from issuers located in both developed and emerging markets.

The ETF may also use certain derivative transactions (currency and cross currency forwards, interest rate swaps and credit default swaps) to obtain its required exposure.

The fund has a net expense ratio of 0.40% due to a contractual fee waiver in place until at least the end of July 2019. Its gross expense ratio is 0.84%.

FLIA seeks to maximize total investment return, consisting of a combination of interest income and capital appreciation, by investing primarily in investment grade fixed or floating-rate bonds issued by governments, government agencies and governmental-related or corporate issuers located outside the US. A maximum of 20% of the portfolio’s value may be invested in high yield securities. The fund also regularly enters into various currency-related and other transactions involving derivatives.

The fund has a net expense ratio of 0.35% due to a contractual fee waiver in place until at least the end of July 2019. Its gross expense ratio is 0.69%.

“In a persistently low-yield environment like the one we’ve been in, the need for income has intensified while advisors and clients are challenged in finding it,” said Patrick O’Connor, head of global ETFs, Franklin Templeton. “With more than 150 fixed income investment professionals globally and dedicated teams that focus on various sectors across the credit spectrum, Franklin Templeton Fixed Income Group brings an in-depth understanding of the full opportunity set that can be leveraged to generate income.

“As investors look to get more income out of their fixed income allocation, these new ETFs enable them to access additional fixed income sectors globally in a targeted way, as they define what they need and how they want to achieve it.”

The new launches expand the Franklin LibertyShares’ line-up of fixed income active ETFs to seven. The other funds in the suite include the Franklin Liberty Short Duration US Government ETF (FTSD US), Franklin Liberty Investment Grade Corporate ETF (FLCO US), Franklin Liberty Intermediate Municipal Opportunities ETF (FLMI US) and Franklin Liberty Municipal Bond ETF (FLMB US).

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