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Should Franklin LibertyQ U.S. Equity ETF (FLQL) Be on Your Investing Radar?

Zacks Equity Research logoZacks Equity Research 10/10/2019 Zacks Equity Research

Designed to provide broad exposure to the Large Cap Blend segment of the US equity market, the Franklin LibertyQ U.S. Equity ETF (FLQL) is a passively managed exchange traded fund launched on 04/26/2017.

The fund is sponsored by Franklin Templeton Investments. It has amassed assets over $1.20 B, making it one of the larger ETFs attempting to match the Large Cap Blend segment of the US equity market.

Why Large Cap Blend

Large cap companies typically have a market capitalization above $10 billion. Overall, they are usually a stable option, with less risk and more sure-fire cash flows than mid and small cap companies.

Blend ETFs usually hold a mix of growth and value stocks as well as stocks that exhibit both value and growth characteristics.

Costs

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

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

It has a 12-month trailing dividend yield of 1.78%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector--about 18.90% of the portfolio. Consumer Discretionary and Consumer Staples round out the top three.

Looking at individual holdings, Apple Inc (AAPL) accounts for about 1.15% of total assets, followed by Target Corp (TGT) and Texas Instruments Inc (TXN).

The top 10 holdings account for about 11.05% of total assets under management.

Performance and Risk

FLQL seeks to match the performance of the LibertyQ US Large Cap Equity Index before fees and expenses. 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.

The ETF has added about 18.78% so far this year and it's up approximately 6.30% in the last one year (as of 10/10/2019). In the past 52-week period, it has traded between $26.18 and $33.24.

The ETF has a beta of 0.88 and standard deviation of 11.83% for the trailing three-year period. With about 253 holdings, it effectively diversifies company-specific risk.

Alternatives

Franklin LibertyQ U.S. Equity ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FLQL is a reasonable option for those seeking exposure to the Style Box - Large Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Core S&P 500 ETF (IVV) and the SPDR S&P 500 ETF (SPY) track a similar index. While iShares Core S&P 500 ETF has $184.06 B in assets, SPDR S&P 500 ETF has $264.77 B. IVV has an expense ratio of 0.04% and SPY charges 0.09%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

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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