Is Franklin U.S. Mid Cap Multifactor Index ETF (FLQM) a Strong ETF Right Now?

Making its debut on 04/26/2017, smart beta exchange traded fund Franklin U.S. Mid Cap Multifactor Index ETF (FLQM) provides investors broad exposure to the Style Box - Mid Cap Blend category of the market.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

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.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

Managed by Franklin Templeton Investments, FLQM has amassed assets over $524.99 million, making it one of the average sized ETFs in the Style Box - Mid Cap Blend. Before fees and expenses, this particular fund seeks to match the performance of the LibertyQ U.S. Mid Cap Equity Index.

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

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Operating expenses on an annual basis are 0.30% for FLQM, making it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 1.18%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

For FLQM, it has heaviest allocation in the Industrials sector --about 22.60% of the portfolio --while Consumer Discretionary and Information Technology round out the top three.

Looking at individual holdings, Fair Isaac Corp (FICO) accounts for about 1.27% of total assets, followed by Phillips 66 (PSX) and Trane Technologies Plc (TT).

FLQM's top 10 holdings account for about 11.76% of its total assets under management.

Performance and Risk

The ETF has gained about 6.94% so far this year and is up about 18.44% in the last one year (as of 03/07/2024). In the past 52-week period, it has traded between $40.75 and $51.47.

The fund has a beta of 1.02 and standard deviation of 17.05% for the trailing three-year period. With about 203 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 $62.39 billion in assets, iShares Core S&P Mid-Cap ETF has $82.04 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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Franklin U.S. Mid Cap Multifactor Index ETF (FLQM): ETF Research Reports

Fair Isaac Corporation (FICO) : Free Stock Analysis Report

Phillips 66 (PSX) : Free Stock Analysis Report

Trane Technologies plc (TT) : Free Stock Analysis Report

iShares Core S&P Mid-Cap ETF (IJH): ETF Research Reports

Vanguard Mid-Cap ETF (VO): ETF Research Reports

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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