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Is Franklin U.S. Large Cap Multifactor Index ETF (FLQL) a Strong ETF Right Now?

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Making its debut on 04/26/2017, smart beta exchange traded fund Franklin U.S. Large Cap Multifactor Index ETF (FLQL - Free Report) provides investors broad exposure to the Style Box - Large Cap Blend category of the market.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

The fund is managed by Franklin Templeton Investments, and has been able to amass over $1.53 billion, which makes it one of the larger ETFs in the Style Box - Large Cap Blend. FLQL seeks to match the performance of the LibertyQ US Large Cap Equity Index before fees and expenses.

The LibertyQ US Large Cap Equity Index seeks to achieve a lower level of risk and higher risk-adjusted performance than the Russell 1000 Index over the long term by applying a multi-factor selection process, which is designed to select equity securities from the Russell 1000 Index that have favorable exposure to four investment style factors quality, value, momentum and low volatility.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.15%, making it one of the cheaper products in the space.

The fund has a 12-month trailing dividend yield of 1.09%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

FLQL's heaviest allocation is in the Information Technology sector, which is about 32.30% of the portfolio. Its Healthcare and Consumer Discretionary round out the top three.

When you look at individual holdings, Apple Inc (AAPL - Free Report) accounts for about 7.74% of the fund's total assets, followed by Nvidia Corp (NVDA - Free Report) and Microsoft Corp (MSFT - Free Report) .

The top 10 holdings account for about 35.42% of total assets under management.

Performance and Risk

Year-to-date, the Franklin U.S. Large Cap Multifactor Index ETF has gained about 3.80% so far, and it's up approximately 22.43% over the last 12 months (as of 02/05/2025). FLQL has traded between $49.92 and $61.32 in this past 52-week period.

The fund has a beta of 0.94 and standard deviation of 16.10% for the trailing three-year period. With about 216 holdings, it effectively diversifies company-specific risk.

Alternatives

Franklin U.S. Large Cap Multifactor Index ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. There are other ETFs in the space which investors could consider as well.

Vanguard S&P 500 ETF (VOO - Free Report) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY - Free Report) tracks S&P 500 Index. Vanguard S&P 500 ETF has $600.42 billion in assets, SPDR S&P 500 ETF has $627.23 billion. VOO has an expense ratio of 0.03% and SPY charges 0.09%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Blend.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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