Making its debut on 04/26/2017, smart beta exchange traded fund Franklin LibertyQ U.S. Equity ETF (FLQL) provides investors broad exposure to the Large Cap ETFs category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

Even though this space provides many choices to investors–think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting–not all have been able to deliver first-rate results.

Fund Sponsor & Index

FLQL is managed by Franklin Templeton Investments, and this fund has amassed over $397.52 M, which makes it one of the average sized ETFs in the Large Cap ETFs. 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.

Cost & Other Expenses

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF’s expense ratio.

With on par with most peer products in the space, this ETF has annual operating expenses of 0.25%.

The fund has a 12-month trailing dividend yield of 1.65%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund’s holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

FLQL’s heaviest allocation is in the Information Technology sector, which is about 19.40% of the portfolio. Its Consumer Discretionary and Consumer Staples round out the top three.

Looking at individual holdings, Eli Lilly + Co (LLY) accounts for about 1.29% of total assets, followed by Procter + Gamble Co/the (PG) and Walmart Inc (WMT).

Its top 10 holdings account for approximately 12.03% of FLQL’s total assets under management.

Performance and Risk

The ETF has added about 2.12% and is up about 6.42% so far this year and in the past one year (as of 11/21/2018), respectively. FLQL has traded between $27.88 and $31.54 during this last 52-week period.

The ETF has a beta of 0.80 and standard deviation of 10.26% for the trailing three-year period. With about 249 holdings, it effectively diversifies company-specific risk.


Franklin LibertyQ U.S. Equity ETF is a reasonable option for investors seeking to outperform the Large Cap ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Core S&P 500 ETF (IVV) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY) tracks S&P 500 Index. IShares Core S&P 500 ETF has $155.11 B in assets, SPDR S&P 500 ETF has $251.33 B. IVV has an expense ratio of 0.04% and SPY charges 0.09%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Large Cap ETFs.

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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FL-LBTY US EQ (FLQL): ETF Research Reports
Eli Lilly and Company (LLY): Free Stock Analysis Report
ISHARS-SP500 (IVV): ETF Research Reports
SPDR-SP 500 TR (SPY): ETF Research Reports
Walmart Inc. (WMT): Free Stock Analysis Report
Procter & Gamble Company (The) (PG): Free Stock Analysis Report
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