The Franklin LibertyQ U.S. Equity ETF (FLQL - Free Report) made its debut on 04/26/2017, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Large Cap Blend category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Managed by Franklin Templeton Investments, FLQL has amassed assets over $396.50 M, making it one of the average sized ETFs in the Style Box - Large Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the LibertyQ US Large Cap Equity Index.
The U.S. Large Cap Underlying 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 FLQL are 0.25%, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.64%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
FLQL's heaviest allocation is in the Information Technology sector, which is about 19.70% of the portfolio. Its Consumer Discretionary and Consumer Staples round out the top three.
Looking at individual holdings, Eli Lilly + Co (LLY - Free Report) accounts for about 1.34% of total assets, followed by Procter + Gamble Co/the (PG - Free Report) and Pfizer Inc (PFE - Free Report) .
The top 10 holdings account for about 12.04% of total assets under management.
Performance and Risk
The ETF return is roughly 2.61% and was up about 3.76% so far this year and in the past one year (as of 12/13/2018), respectively. FLQL has traded between $27.88 and $31.54 during this last 52-week period.
FLQL has a beta of 0.80 and standard deviation of 10.74% for the trailing three-year period. With about 249 holdings, it effectively diversifies company-specific risk.
Franklin LibertyQ U.S. Equity ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core S&P 500 ETF (IVV - Free Report) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY - Free Report) tracks S&P 500 Index. IShares Core S&P 500 ETF has $154.80 B in assets, SPDR S&P 500 ETF has $250.66 B. IVV has an expense ratio of 0.04% 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.
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.