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Franklin Templeton's LibertyShares Launches Active Core Bond ETF

September 21, 2019 4:34 pm
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Franklin Templeton's LibertyShares Launches Active Core Bond ETF

LibertyShares, Franklin Templeton's brand of exchange traded funds, added to its lineup of fixed-income funds this week with the debut of the Franklin Liberty U.S. Core Bond ETF (NYSE:FLCB).

What Happened

The new Franklin Liberty U.S. Core Bond ETF can be used as an alternative to traditional, passively managed aggregate bond strategies, as the new LibertyShares fund is actively managed and seeks low tracking error relative to the widely followed Bloomberg Barclays Aggregate Bond Index.

“Franklin Templeton’s fixed income and quantitative research teams review issuers and assess risks from multiple perspectives, which results in a truly holistic viewpoint on each potential investment,” according to a statement from the issuer.

“FLCB will be managed by David Yuen, SVP, head of quantitative and multi-sector strategies, Amy Cooper, VP, portfolio manager, Patrick Klein, SVP, portfolio manager, multi-sector strategies, and Tina Chou, VP, portfolio manager, with Franklin Templeton Fixed Income Group.”

Why It's Important

FLCB came to market with just over $100 million in assets under management, putting it in the upper echelon of new ETFs this year, active or passive.

Nearly 58% of the new ETF's roster is allocated to Treasuries and agency debt, with about 28% coming from a category deemed as “other.”

Examining FLCB's roster of 88 holdings, which is highly focused relative to passive total bond funds, it's reasonable to assume the bulk of that “other” category is investment-grade corporate debt.

FLCB's Treasury holdings give the fund a duration contribution of just over two years, while the other category has a duration contribution of 2.29 years, according to issuer data. FLCB has an average duration of 5.59 years.

Over 72% of FLCB's holdings are rated AAA, AA or A. Another 18.56% are rated BBB.

What's Next

FLCB is the eighth ETF in the LibertyShares fixed-income lineup, a roster that covers investment-grade corporates, municipal bonds, international debt, senior loans and junk bonds. FLCB charges 0.15% per year, or $15 on a $10,000 investment, making it cost-effective among actively managed funds.

At the end of August, LibertyShares had $4.4 billion in assets under management.

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