Is Franklin U.S. Large Cap Multifactor Index ETF (FLQL) a Strong ETF Right Now?
The Franklin U.S. Large Cap Multifactor Index ETF (FLQL) was launched on 04/26/2017, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Large Cap Blend category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by Franklin Templeton Investments. FLQL has been able to amass assets over $1.34 billion, making 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for FLQL are 0.15%, which makes it one of the cheaper products in the space.
FLQL's 12-month trailing dividend yield is 1.13%.
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.
Representing 33.40% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Healthcare and Consumer Discretionary round out the top three.
When you look at individual holdings, Apple Inc (AAPL) accounts for about 6.80% of the fund's total assets, followed by Microsoft Corp (MSFT) and Nvidia Corp (NVDA).
The top 10 holdings account for about 32.99% of total assets under management.
Performance and Risk
The ETF has added about 21.52% and it's up approximately 36.90% so far this year and in the past one year (as of 10/04/2024), respectively. FLQL has traded between $41.57 and $58.15 during this last 52-week period.
The fund has a beta of 0.94 and standard deviation of 16.12% for the trailing three-year period. With about 215 holdings, it effectively diversifies company-specific risk.
Alternatives
Franklin U.S. Large Cap Multifactor Index 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) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY) tracks S&P 500 Index. IShares Core S&P 500 ETF has $525.90 billion in assets, SPDR S&P 500 ETF has $581.96 billion. IVV 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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Franklin U.S. Large Cap Multifactor Index ETF (FLQL): ETF Research Reports
Apple Inc. (AAPL) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
SPDR S&P 500 ETF (SPY): ETF Research Reports
iShares Core S&P 500 ETF (IVV): ETF Research Reports