Our Latest Building Blocks

    Ahmed Farooq, CFP, CIMA®

    Ahmed Farooq, CFP, CIMA®Vice President - ETF Business DevelopmentFranklin Templeton Canada

    Franklin Templeton has a legacy of responding to the evolving needs of our clients and providing the key building blocks of a diversified portfolio. Our foray into the Canadian ETF market in 2017 reflects our commitment to bringing a full spectrum of products and solutions to market for our clients. And the latest addition to our ETF platform is a continuation of this commitment—a suite of regional and country- specific passive ETFs that can be used within a diversified portfolio for low-cost, precise exposures.

    These new passive ETFs can be used strategically with allocations to our Smart Beta and active ETFs, as well as our extensive mutual funds offerings, for a comprehensive set of portfolio building blocks. And as a historically active shop, when it comes to indexed exposure, we believe that if this is what you’re looking for, those ETFs better be cheap.

    Passive options for active managers

    In 2017, Franklin Templeton launched a broad suite of country and regional specific ETFs in the U.S., and feedback has been tremendous from retail and institutional clients alike. Certainly, the competitive management fees (which are in some cases best-in-class as compared to our key competitors) are a compelling reason to choose our ETFs, but this is a potentially narrow view that misses the larger benefits.

    Client data collected on our U.S.-registered suite of country and regional ETFs indicates that the buyers tend to be institutional asset managers, ETF strategist and discretional portfolio managers. This is sophisticated group of investors that don’t typically build portfolios made up 100% of passive investments. Instead they more commonly use a blend of active and passive solutions, along with a few other niche strategies that helps them align their portfolio with the outcome they are trying to achieve.

    In building these more complex, outcome-oriented portfolios, these sophisticated investors often have strong convictions about a specific region or country, views that our passive ETF lineup can help them implement with low-cost precision. And by now offering a suite of regional and country solutions in Canada, these passive ETFs can help tilt a portfolio or disaggregate from broader regional exposures for more precise, tactical exposures.

    Regional views and exposures

    FLJA - Franklin FTSE Japan Index ETF – We believe that current Japan equity market valuations are attractive (particularly on a price-to-book value basis) relative to other markets. FLJA fills a market gap by being the first and only ETF in Canada that offers broad, passive exposure to Japanese equities.

    FLUR – Franklin FTSE Europe ex U.K. Index ETF – I like to call this our “Brexit ETF”. With weeks to go before the U.K is poised to leave the European Union, uncertainty prevails. I understand why investors may prefer to avoid taking on the perceived risks associated with the U.K. until there is more clarity. FLUR is the only ETF in Canada that offers this unique ability to disaggregate from the U.K. while keeping your European exposure.

    FLAM – Franklin FTSE U.S. Index ETF – The U.S market started off 2019 with a bang as the Fed outlined a more gradual approach to interest rate hikes. Though there are still geopolitical headwinds and unresolved trade tensions, our investment professionals see positive growth fundamentals and the U.S. remains an important part of a diversified Canadian portfolio. FLAM also offers the lowest management fee of any passive U.S equity fund in the Canada market.

    FLCD - Franklin FTSE Canada All Cap Index ETF – The Canadian market continues to face the dual headwinds of trade uncertainty with the U.S and China coupled with rising interest rates, but these short-term issues should eventually be resolved. Once there is more clarity around the future between these two trading giants, it could lift the broader market, and FLCD gives you that domestic exposure with competitive pricing.

    The evolution of Franklin LibertyShares®

    We launched our first Franklin LibertyShares ETFs in Canada less than two years ago, so we are still relatively new to the market. Within this short time frame, the LibertyShares platform has evolved from Smart Beta and actively managed ETFs to a comprehensive suite that now includes passive country/region specific. You can expect to see more diverse ETF offerings as we continue to evolve in the future, and as we continue to focus on helping clients build portfolios for the outcomes they want. I think these new passive solutions will pair well with our existing lineup of active and Smart Beta solutions to help achieve that goal.

    Commissions, management fees and expenses may all be associated with investments in ETFs. Investors should carefully consider an ETF’s investment objectives and strategies, risks, fees and expenses before investing. The prospectus and ETF facts contain this and other information. Please read the prospectus and ETF facts carefully before investing. ETFs trade like stocks, fluctuate in market value and may trade at prices above or below the ETF’s net asset value. Brokerage commissions and ETF expenses will reduce returns. Performance of an ETF may vary significantly from the performance of an index, as a result of transaction costs, expenses and other factors. The indicated rates of return are the historical annual compounded total returns including changes in share or unit value and reinvestment of all dividends or distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. ETFs are not guaranteed, their values change frequently and past performance may not be repeated.

    Ahmed Farooq’s comments, opinions and analyses are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. Because market and economic conditions are subject to rapid change, comments, opinions and analyses are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy.

    All investments involve risks, including the possible loss of principal. Investments in foreign securities involve special risks including currency fluctuations, economic instability and political developments. Investments in emerging markets, of which frontier markets are a subset, involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size, lesser liquidity and lack of established legal, political, business and social frameworks to support securities markets. Because these frameworks are typically even less developed in frontier markets, as well as various factors including the increased potential for extreme price volatility, illiquidity, trade barriers and exchange controls, the risks associated with emerging markets are magnified in frontier markets. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting