Is Franklin U.S. Large Cap Multifactor Index ETF (FLQL) a Strong ETF Right Now?
Designed to provide broad exposure to the Style Box - Large Cap Blend category of the market, the Franklin U.S. Large Cap Multifactor Index ETF (FLQL) is a smart beta exchange traded fund launched on 04/26/2017.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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.
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
The fund is managed by Franklin Templeton Investments, and has been able to amass over $900.08 million, which makes it one of the larger ETFs in the Style Box - Large Cap Blend. This particular fund 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.15% for this ETF, which makes it one of the cheaper products in the space.
The fund has a 12-month trailing dividend yield of 1.88%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
Representing 34.30% 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 7.91% of the fund's total assets, followed by Microsoft Corp (MSFT) and Eli Lilly + Co (LLY).
Its top 10 holdings account for approximately 29.35% of FLQL's total assets under management.
Performance and Risk
The ETF has added about 15.06% so far this year and was up about 15.31% in the last one year (as of 09/14/2023). In the past 52-week period, it has traded between $36.61 and $45.68.
FLQL has a beta of 0.92 and standard deviation of 16.03% 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 $350.48 billion in assets, SPDR S&P 500 ETF has $416.16 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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
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
Eli Lilly and Company (LLY): Free Stock Analysis Report
SPDR S&P 500 ETF (SPY): ETF Research Reports
iShares Core S&P 500 ETF (IVV): ETF Research Reports