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

If you're interested in broad exposure to the Large Cap Blend segment of the US equity market, look no further than the Franklin LibertyQ U.S. Equity ETF (FLQL), a passively managed exchange traded fund launched on 04/26/2017.

The fund is sponsored by Franklin Templeton Investments. It has amassed assets over $1.18 billion, making it one of the larger ETFs attempting to match the Large Cap Blend segment of the US equity market.

Why Large Cap Blend

Companies that fall in the large cap category tend to have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.

Blend ETFs are aptly named, since they tend to hold a mix of growth and value stocks, as well as show characteristics of both kinds of equities.

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 cheaper products in the space.

It has a 12-month trailing dividend yield of 1.77%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector--about 23.50% of the portfolio. Healthcare and Industrials round out the top three.

Looking at individual holdings, Nvidia Corp (NVDA) accounts for about 1.20% of total assets, followed by Adobe Inc (NASDAQ:ADBE) and Eli Lilly + Co (LLY).

The top 10 holdings account for about 10.92% 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 17.14% so far this year and was up about 28.96% in the last one year (as of 09/23/2021). In the past 52-week period, it has traded between $33.63 and $45.19.

The ETF has a beta of 0.90 and standard deviation of 21.48% for the trailing three-year period. With about 258 holdings, it effectively diversifies company-specific risk.

Alternatives

Franklin LibertyQ U.S. Equity ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FLQL is an excellent option for investors seeking exposure to the Style Box - Large Cap Blend segment of the market. There are other additional ETFs in the space that investors could consider as well.

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 $300.17 billion in assets, SPDR S&P 500 ETF has $398.44 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds 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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