The combination of an Average People Pillar rating and a Below Average Process Pillar rating limit  Franklin U.S. Low Volatility ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy gets a Below Average Process Pillar rating, after recently downgrading from Average. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in volatility exposure and quality exposure compared with category peers. Low volatility exposure is attributed to stocks with a lower standard deviation of returns. And a low quality exposure is rooted in stocks with higher financial leverage and lower profitability. The strategy’s management team earns an Average People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Vontier Corporation

Amphenol

Oracle

Microsoft

ANSYS

Intuit

Texas Instruments

Roper Technologies

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. Franklin U.S. Low Volatility ETF earns a Below Average Process Pillar rating. 

The process is bolstered by the stability of the management team. Specifically, the fund has not seen a manager change in the last seven years. However, the rating is limited by its parent firm's subpar risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 2.5 stars. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis. The parent firm's five-year risk-adjusted success ratio of 37% also holds the process back. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's subpar success ratio suggests that the firm could do better across its fund lineup.

 This strategy leans toward smaller, more value-oriented companies compared with its average peer in the Large Blend Morningstar Category. Analyzing additional factors, this strategy has consistently exhibited a tilt toward low-volatility stocks or companies whose shares have a history of lower standard deviation of returns, compared with its Morningstar Category peers in recent years. These low-risk stocks are typically at their best when markets are not. Low volatility exposure contributes to limited loss on the downside at the cost of a lag in bull markets. In the latest month, the strategy was also less exposed to the Volatility factor compared with Morningstar Category peers. This strategy has also favored low-quality stocks. This means the fund avoids holding companies that are consistently profitable, growing, and have solid balance sheets. Lacking this ballast, the fund's prospects could rest on its ability to surpass peers during economic booms. Similarly, in recent months, the strategy also had less exposure to the Quality factor than peers. Additionally, the strategy has demonstrated a contrarian approach with relatively low exposure to momentum stocks during these years. Momentum tends to be a powerful force in asset markets, as stocks that have done well recently usually continue to do so in the short term. As top performers change, this can sometimes be hard to capture without higher trading costs. In recent months, the strategy also had less Momentum factor exposure than its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio has allocations in its top two sectors, consumer cyclical and technology, that are similar to the category. The sectors with low exposure compared to category peers are healthcare and financial services; however, the allocations are similar to the category. The portfolio is composed of 85 holdings and is diversified among those holdings. In its most recent portfolio, 17.2% of the strategy's assets were concentrated in the top 10 fund holdings, compared to the category’s 48.8% average. And finally, in terms of portfolio turnover, on a year-over-year basis, 32% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Below Average

Process

Franklin U.S. Low Volatility ETF's sole listed portfolio manager has proven themself as effective as the next manager, leading to an Average People Pillar rating. Todd Brighton brings over eight years of portfolio management experience to the table. Across strategies managed, Brighton has an average Morningstar Rating of 3.2, indicating above-average risk-adjusted performance.  Isolating the analysis to the fund at hand, Todd Brighton has delivered a mixed track record, leading the average category peer but lagging the category benchmark for the past seven-year period. Finally, Todd Brighton has invested between $100,000 and $500,000 in the strategy, making an effort to align interests with shareholders and establish a proper incentive structure.

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

Average

People

Franklin Templeton Investments, the asset-management arm of publicly traded but family managed Franklin Resources BEN, has been busy with acquisitions. The struggle in streamlining these disparate capabilities underpins its Average Parent rating. 
Franklin’s July 2020 acquisition of multiboutique manager Legg Mason remains its largest as of March 2023, but the firm has continued to grow through acquisitions. Its April 2022 and November 2022 purchases of Lexington Partners and Alcentra, respectively, make it one of world’s largest managers of alternative investments (with alts comprising USD 231 billion of its USD 1.4 trillion assets under management as of December 2022), while its July 2022 acquisition of O’Shaughnessy Asset Management adds a novel direct-indexing capability to its managed account offerings. These purchases, however, do little to alleviate the operational complexity of a firm with dozens of investment teams split by asset class, region, and investment platform.   
Although there are several standout strategies at the firm, many teams have struggled with personnel turnover, succession challenges, and unappealing performance patterns. Shepherding these geographically disparate capabilities, which have varying levels of centralization of distribution and risk management, shall be quite the challenge for the firm to manage.

Parent

Franklin U.S. Low Volatility ETF

FLLV is an actively-managed fund which seeks capital appreciation with lower volatility than the Russell 1000 Index.

Franklin Liberty High Yield Corporate ETF

iShares iBoxx High Yield Corporate Bond ETF

Franklin Income Focus ETF

For nearly 75 years, Franklin Income, the mutual fund, has helped advisors and end clients. Through bull, bear, and even boring markets, the $70 billion portfolio provided uninterrupted income from equity and fixed income securities.

This Generation's Franklin Income Strategy

As the dust settles from the bank rescues of First Republic Bank and Credit Suisse, the effects could be far from over. As such, more volatility could be ahead for investors if the banking sector proves to be on shakier ground than originally anticipated.

Shaky Banking Sector Could Spur More Volatility Ahead

Franklin LibertyQ U.S. Small Cap Equity ETF

Invesco S&P 500 Low Volatility ETF

iShares Edge MSCI Min Vol USA ETF

Vanguard U.S. Minimum Volatility ETF

Zacks Earnings Consistent Portfolio ETF

Bull vs. Bear is a weekly feature where the VettaFi writers' room takes opposite sides for a debate on controversial stocks, strategies, or market ideas — with plenty of discussion of ETF ideas to play either angle. For this edition of Bull vs.

Bull vs. Bear: Go Active for Low-Volatility Equity Exposure

With stocks sagging and market volatility creeping higher, some investors are turning to a familiar destination in an effort to remain engaged with equities: Low volatility exchange traded funds. The Franklin Liberty U.S. Low Volatility ETF (FLLV) is one of the members of that group.

What Goes Up Must Come Down: Beating Volatility With FLLV

Starbucks and McDonald's are exiting Russia nearly three months after the country launched its invasion of Ukraine. On Monday, Starbucks announced that it will no longer have a brand presence in Russia after 15 years in the country.

Starbucks & McDonald's Exit Russia

In 2016, ETFs were still synonymous with “passive” or “index-tracking” investing. Active ETFs were only 2% of total US ETF flows for the year. FLLV's investment process relies on deep fundamental analysis as well as a quantitative screen to identify companies that have demonstrated the lowest level of volatility in each sector.

Celebrating An ETF Milestone With A Look At Volatility

SPDR Gold Trust

iShares 7-10 Year Treasury Bond ETF

Technology Select Sector SPDR Fund

Consumer Staples Select Sector SPDR Fund

The highly contagious delta variant of Covid has been found in about 100 countries. It could slow down the global growth rate.

5 ETFs to Win On Delta Variant's Surge

Invesco DB US Dollar Index Bullish Fund

Global coronavirus recovery has been uneven in recent weeks with Europe and many emerging economies like India witnessing a surge in cases.

5 Safe ETFs to Play as Coronavirus Cases Rise Globally

SPDR Dow Jones Industrial Average ETF

Best And Worst Q2 2020: Large Cap Blend ETFs And Mutual Funds

iShares Edge MSCI Min Vol Global ETF

Fidelity Low Volatility Factor ETF

WBI BullBear Quality 3000 ETF

Low-volatility ETFs tend to perform better in a low-rate environment. If coronavirus fear resurfaces, these ETFs may offer you some safety.

5 Low-Volatility ETFs to Fight Second Wave of Virus Threat

ARK Fintech Innovation ETF

ARK Web x.0 ETF

iShares Evolved U.S. Technology ETF

MFAM Small-Cap Growth ETF

SPDR S&P 500 ETF Trust

U.S. investors are increasingly favoring actively-managed ETFs. Notably, a few active ETFs breezed past the solidly-performing S&P 500 too.

Active ETFs Gaining Priority: Top Performers of the Past Year

iShares China Large-Cap ETF

First Trust Utilities AlphaDEX Fund

iShares U.S. Aerospace & Defense ETF

SPDR SSGA US Large Cap Low Volatility Index ETF

Invesco Dynamic Building & Construction ETF

If Trump's impeachment talks go on, these ETF areas may gain or lose.

ETFs to Gain/Lose on Trump's Impeachment

Low-volatility ETFs may gain momentum if Trump's impeachment talks mature.

Low-Volatility ETFs to Pick on Trump's Impeachment Talks

The trade war is calming down with both the sides adopting a peacemaking tone. We highlight low-volatility ETFs that have gained more than 25% this year to ride out trade-related uncertainty.

News for Franklin U.S. Low Volatility ETF ETF (FLLV)