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Franklin Templeton reports growth in demand for EM ETFs in the UK market

Franklin Templeton, with global ETF AUM exceeding USD13 billion, launched its European ETF offering in 2017, and announced last year the hire of Lotfi Ladjemi as Senior ETF Sales Specialist for the UK and Ireland.

Ladjemi says that since arriving at the firm he has seen continued investor interest and demand for the ETF vehicle. “The UK is a key market for us,” he says, adding that his focus is on both institutional investors and wealth managers.

“We see continued interest from institutional investors in our competitively-priced single country emerging market (EM) funds,” Ladjemi says. “Franklin Templeton has a deep history in emerging markets and, more broadly, we know that they can’t all be viewed with the same lens – we look at the disaggregation of emerging markets, which allows investors to optimise and customise exposure as part of the asset allocation process.”

“There are various options but if you want low-cost exposure then the ETF would be the vehicle of choice for that. For example, investors use ETFs to tactically allocate to regions that they find hard to access. With a continued emphasis on transparency and liquidity for institutional investors, the ETF vehicle can provide a solution.”

“Furthermore, ETFs and their robust liquidity, which has held up through challenging markets in 2022, have continued to appeal to institutional investors, Ladjemi says. “ETFs are also used as a transition vehicle for institutional clients in between mandates.”

Franklin Templeton offers emerging market ETFs invested in China, India, Brazil, Korea and Taiwan. “We believe that catalysts for growth in emerging markets include a shift in China’s stance towards managing COVID-19 as well as a strong growth forecast for India, continuing its performance trend in 2022.”

Demand for smart beta returns

Ladjemi also reports continued investor demand for smart beta products, which Franklin Templeton offers in its multi-factor ETFs, focused on the traditional factors of quality and value, which he says is timely given the market backdrop. “We expect multi factor ETFs to continue the outperformance of broad market indices into 2023 with main contributions from value and quality factors. Value was the best performing factor last year and the quality factor can act as a buffer in volatile times providing an element of stability for investors.”

Last year saw Franklin Templeton launch a metaverse ETF, the first in its thematic range. “We are looking to increase funds in our thematic range to meet investor demand,” he says, also noting that there continues to be strong interest in the firm’s ESG range of Paris-aligned ETFs.

“In 2023, we believe the use of ETFs by discretionary portfolio managers for core and tactical asset allocation will be the main growth driver of ETF usage in the UK market.”

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