Franklin Templeton's income ETFs take active approach, except for currencies

Rudy Luukko 14 May, 2018 | 9:00PM
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Expanding its menu of fixed-income exchange-traded funds, Franklin Templeton Investments Canada expressed strong conviction in active securities selection but shied away from foreign-currency risk.

Franklin Liberty Global Aggregate Bond (CAD-Hedged) (symbol: FLGA), Franklin Liberty Senior Loan (CAD-Hedged) (symbol: FLSL) and Franklin Liberty U.S. Investment Grade Corporate (CAD-Hedged) (symbol: FLUI) opened for trading today on the Toronto Stock Exchange. Each will seek to hedge 90% to 100% of its foreign-currency exposure back to the Canadian dollar.

All three are managed by affiliated investment teams that are subsidiaries of parent company  Franklin Resources Inc. (BEN), whose total of about US$732 billion in assets under management includes US$164 billion in fixed-income assets.

The global bond ETF will invest primarily in investment-grade fixed or floating-rate debt securities issued by governments, government-related entities including supranational organizations, and corporations. According to the prospectus, up to 20% of its net assets may be held in non-investment-grade debt securities. Holdings may also include emerging-markets debt.

This ETF is co-managed by John Beck, director of fixed income at Franklin Templeton Investment Management Ltd. in London, and portfolio manager Warren Keyser of Franklin Templeton Institutional LLC in New York. The management fee is 0.35% and, as is the case with other Franklin ETFs, covers most operating expenses.

The senior-loan ETF invests primarily in senior secured floating-rate corporate loans and corporate-debt securities of mostly U.S. issuers. No more than 25% of assets are to be held in non-U.S. issuers. As noted in the prospectus, senior loans are generally rated below investment-grade debt. This ETF is co-managed by Mark Boyadjian, director of Franklin Advisors Inc.'s floating-rate-debt group, and portfolio managers Madeline Lam and Justin Ma, who are all based in San Mateo, California. The management fee is 0.45%.

The U.S. corporate-bond ETF invests primarily in U.S.-dollar-denominated debt securities that are investment-grade and issued by U.S. and non-U.S. entities. Up to 40% of the ETF's assets may be held in securities of non-U.S. issuers, including those in developing markets, and up to 15% of assets may be held in securities denominated in currencies other than the U.S. dollar. The ETF is co-managed by Shawn Lyons of Franklin Advisors in San Mateo and New York-based Marc Kremer of Franklin Templeton Institutional. The management fee is 0.35%.

Today's ETF launches bring the total number of fixed-income Franklin Liberty ETFs to four. They join Franklin Liberty Canadian Investment Grade Corporate (FLCI), which was launched in May 2017 and is managed by Calgary-based managers with Bissett Investment Management. The company also manages five equity ETFs and one balanced mandate, for a total of 10 in all asset classes.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Franklin Resources Inc24.28 USD0.50Rating

About Author

Rudy Luukko

Rudy Luukko  Rudy Luukko is a freelance writer who contributes to on topics involving fund industry trends and regulatory issues. He retired in May 2018 from his position as editor, investment and personal finance, at Morningstar Canada, where he had worked since 2004. He has also worked as an editor and writer for various general, specialty and institutional media, and he has co-authored courses for the Canadian Securities Institute. Follow Rudy on Twitter: @RudyLuukko.

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