The Franklin U.S. Mid Cap Multifactor Index ETF (FLQM) made its debut on 04/26/2017, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Mid Cap Blend category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Managed by Franklin Templeton Investments, FLQM has amassed assets over $943.83 million, making it one of the average sized ETFs in the Style Box - Mid Cap Blend. FLQM seeks to match the performance of the LibertyQ U.S. Mid Cap Equity Index before fees and expenses.
The LibertyQ U.S. Mid Cap Equity Index includes U.S. mid-capitalization companies that have favorable exposure to four investment style factors - quality, value, momentum and low volatility.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Operating expenses on an annual basis are 0.30% for this ETF, which makes it on par with most peer products in the space.
FLQM's 12-month trailing dividend yield is 1.21%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
For FLQM, it has heaviest allocation in the Industrials sector --about 22.70% of the portfolio --while Consumer Discretionary and Information Technology round out the top three.
Taking into account individual holdings, Fair Isaac Corp (FICO) accounts for about 1.29% of the fund's total assets, followed by Dr Horton Inc (DHI) and Gartner Inc (IT).
The top 10 holdings account for about 11.14% of total assets under management.
Performance and Risk
The ETF return is roughly 12.10% and it's up approximately 23% so far this year and in the past one year (as of 09/13/2024), respectively. FLQM has traded between $40.75 and $54.84 during this last 52-week period.
FLQM has a beta of 1.02 and standard deviation of 17.19% for the trailing three-year period. With about 206 holdings, it effectively diversifies company-specific risk.
Alternatives
Franklin U.S. Mid Cap Multifactor Index ETF is a reasonable option for investors seeking to outperform the Style Box - Mid Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Mid-Cap ETF (VO) tracks CRSP US Mid Cap Index and the iShares Core S&P Mid-Cap ETF (IJH) tracks S&P MidCap 400 Index. Vanguard Mid-Cap ETF has $67.34 billion in assets, iShares Core S&P Mid-Cap ETF has $86.79 billion. VO has an expense ratio of 0.04% and IJH charges 0.05%.
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 - Mid 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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Get it free >>Franklin U.S. Mid Cap Multifactor Index ETF (FLQM): ETF Research Reports
D.R. Horton, Inc. (DHI) : Free Stock Analysis Report
Gartner, Inc. (IT) : Free Stock Analysis Report
Fair Isaac Corporation (FICO) : Free Stock Analysis Report
iShares Core S&P Mid-Cap ETF (IJH): ETF Research Reports
Vanguard Mid-Cap ETF (VO): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
