Franklin Templeton Investments has launched an actively-managed exchange-traded fund which seeks a high level of current income and preservation of capital by following a short duration US government portfolio strategy.
The Franklin Short Duration US Government ETF is designed for US investors who are income focused while also looking to achieve lower volatility than intermediate and longer duration strategies. It is also designed for investors looking for a portfolio free from corporate credit risk.
“With Franklin Short Duration US Government ETF, we are taking a yield-driven approach and investing where we see the most attractive short-term yield potential across various US government bond sectors, including higher yielding MBS (Mortgage-Backed Securities), ARMS (Adjustable Rate Mortgage Securities) and TIPS (Treasury Inflation-Protected Securities),” says Roger Bayston, the fund’s lead portfolio manager and senior vice president of Franklin Templeton fixed income group.
“This actively managed ETF can take advantage of opportunities outside of the index (Barclays US Government 1-3 Year Index), which has a much narrower opportunity set,” Bayston says. “The fund may be attractive to risk-averse investors who seek monthly income potential and relative price stability across changing interest rate environments, and do not want exposure to corporate credit cycles.”
Under normal market conditions, the fund will invest at least 80 per cent of its net assets in securities issued or guaranteed by the US government, its agencies or instrumentalities, including government-sponsored entities. The fund generally will invest a substantial portion of its assets in mortgage-backed securities including ARMS, but the fund will also invest in direct obligations of the US government (such as Treasury bonds, bills and notes). The fund may also invest in US inflation-indexed securities issued by the US government.
“As a firm, we continue to focus on traditional active fund management and seek to provide attractive long-term returns for our clients,” says Peter Jones, president of Franklin Templeton Distributors. “The vehicles in which we have offered our strategies have evolved and expanded over time, and the introduction of Franklin Short Duration US Government ETF represents our first foray into actively managed ETFs.”