Franklin Templeton adds EM multi-factor ETF to LibertyShares suite

Oct 19th, 2017 | By | Category: Equities

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Franklin Templeton has added to its line-up of Europe-listed ETFs with the launch of the Franklin Templeton LibertyQ Emerging Markets UCITS ETF. The fund, which tracks the performance of large- and mid-cap emerging markets stocks selected using a multi-factor approach, becomes the fifth fund from the provider in its LibertyShares range of smart beta ETFs after the rollout of the initial four last month.

Franklin Templeton adds multi-factor ETF to Liberty Shares suite

Vivek Kudva, head of EMEA and India at Franklin Templeton.

Vivek Kudva, head of EMEA and India at Franklin Templeton, commented: “We are very excited to announce the addition of a fifth ETF to our Franklin LibertyShares Smart Beta UCITS ETF range. We believe in giving our clients freedom of choice and options in their investment decisions, hence we called our range ‘Liberty’. We think this new strategy can be utilised as a strategic and long-term allocation for those investors looking for an alternative way of accessing emerging markets as part of their diversified portfolio.”

The ETF tracks the LibertyQ Emerging Markets Index. Constituents are selected from the MSCI Emerging Markets Index using a multi-factor selection process that applies four investment style factors (quality, value, momentum and low volatility).

The index methodology is similar to that used by the indices tracked by the Franklin LibertyQ Global Equity SRI UCITS ETF (LON: FLXG) and the Franklin LibertyQ US Equity UCITS ETF (LON: FLXU). All stocks in the parent index are given a composite score based on their exposure to four single factors, with a 50% weight given to quality, 30% to value and 10% each to momentum and low volatility. The 25% of stocks with the highest composite factor scores are selected to become index constituents and are weighted based on a combination of market capitalisation and composite factor score with individual securities capped at 1%.

Patrick O’Connor, head of global ETFs, Franklin Templeton, said: “We believe emerging markets offer some of the most compelling opportunities available in equity markets today and many investors are looking for a lower risk option of accessing the sector. A multi-factor screened approach can help to identify attractive opportunities within emerging markets, while providing diversification among investment factors, resulting in a potentially less volatile return profile.”

The fund is listed on the London Stock Exchange in dollars and pounds sterling under the ticker symbols FREM and FLXE respectively, and on Xetra in euros under the ticker symbol FLXE. The ETF has a total expense ratio (TER) of 0.55%.

European investors already have a number of single factor emerging markets ETFs to choose from including the iShares MSCI EM Minimum Volatility (LON: EMLV), the Lyxor FTSE Emerging Minimum Variance UCITS ETF (LON: MVAM) and the iShares MSCI EM High Dividend (LON: SEDY).

There is only one other Europe-listed ETF that provides exposure to emerging markets equities using a multi-factor approach, the PowerShares FTSE Emerging Markets High Dividend Low Volatility UCITS ETF (LON: EMHD). The fund was launched in May 2016 and has $23 million in assets with a TER of 0.49%.

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