Designed to provide broad exposure to the Style Box - Mid Cap Blend category of the market, the Franklin U.S. Mid Cap Multifactor Index ETF (FLQM) is a smart beta exchange traded fund launched on 04/26/2017.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
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
Because the fund has amassed over $1.30 billion, this makes it one of the average sized ETFs in the Style Box - Mid Cap Blend. FLQM is managed by Franklin Templeton Investments. Before fees and expenses, FLQM 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
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.
Annual operating expenses for FLQM are 0.30%, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 1.27%.
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.
Representing 22.60% of the portfolio, the fund has heaviest allocation to the Industrials sector; Consumer Discretionary and Financials round out the top three.
Taking into account individual holdings, Deckers Outdoor Corp (DECK) accounts for about 1.13% of the fund's total assets, followed by Godaddy Inc Class A (GDDY) and Williams Sonoma Inc (WSM).
The top 10 holdings account for about 10.66% of total assets under management.
Performance and Risk
So far this year, FLQM has added roughly 0.42%, and is up about 15.89% in the last one year (as of 01/14/2025). During this past 52-week period, the fund has traded between $47.07 and $58.81.
The fund has a beta of 1.04 and standard deviation of 17.03% 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 $72.34 billion in assets, iShares Core S&P Mid-Cap ETF has $94.84 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
Deckers Outdoor Corporation (DECK) : Free Stock Analysis Report
Williams-Sonoma, Inc. (WSM) : Free Stock Analysis Report
GoDaddy Inc. (GDDY) : 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.
