President and COO, Franklin Templeton Investments
Can you tell us why you’re here today?
A little over a year ago, Franklin Templeton set out to launch a world-class global ETF platform with Franklin LibertyShares. In the past year, we launched our smart beta and active listings, and recently celebrated over $1 billion dollars in assets under management (AUM). Today marks our next step, which is a foray into a series of passive ETFs.
Why is today an important day for Franklin Templeton and its clients?
Today we are launching 16 passive ETFs, including both country-specific ETFs and region-specific ETFs. We’re excited about them because our clients look for this type of vehicle to be used as a building block in a lot of their portfolios and solutions capabilities.
We think beta should be inexpensive. And these are, if not the lowest, close to the lowest, in their category.
Can you tell us about Franklin Templeton’s ETF business?
Franklin Templeton launched the Franklin LibertyShares platform, and in the last 18 months we launched it in the U.S., Europe and Canada. As a matter of fact, we’re the first ETF provider to launch in three different regions in such a short amount of time.
We have smart beta, we have active products, and now we have our 16 passive products with the plan of launching more passive products in 2018.
Can you describe the strategy behind these LibertyShares funds?
Franklin Templeton is celebrating its 70th anniversary this year – 2017. The reason, as a firm, we’ve lasted so long is we’re very focused on listening to what our clients’ needs are.
And the feedback from our clients was, as they’re building portfolios with more outcome-oriented solutions, one of the things that they wanted was cheap beta exposure to incorporate into a portfolio of solutions. Particularly pension funds, large institutions, and even financial advisors who do custom portfolios. As we listened to that, we found that there was an opportunity for really creating a low cost passive product. And it sits alongside of our active ETFs and our smart beta ETFs – so our job is to create a suite of products from which our clients are able to pick.
We see these passive ETFs really as a building block in a broader portfolio with a combination of active and passive.
What are the main indicators of the growth in the ETF industry, and why you do you think the ETF industry has grown so much?
I think it’s important to understand that an ETF is a vehicle through which you deliver your investment management capabilities. Often people associate it with passive, but it’s just one way to deliver investment options.
And there are both benefits and drawbacks to that vehicle. And so it’s important to understand what the ETF vehicle is versus, say, a mutual fund vehicle.
So the ETF has, in the U.S., some tax benefits. The ETF has intraday trading. That’s an important feature in some instances.
On the other hand, because of the transparency, the ETF may not necessarily be the best vehicle for active; it just depends on the needs of the investor.
The ETF has different fee structures than a traditional mutual fund. Some distribution channels may prefer a traditional mutual fund over an ETF, and vice-versa.
For Franklin Templeton, we view it as: we have this world-class investment capability – we’re going to deliver it in the kinds of investment vehicles that our clients desire. And that may be a traditional mutual fund, that may be a separate account, or that may be an ETF.
We value your business here at the New York Stock Exchange. What are some of the criteria that you weighed in determining where to list your family of funds?
When you have a stock exchange that’s been around 225 years, there’s a real appreciation for the tradition and reputation. We love being associated with the tradition of the New York Stock Exchange. And I think it may be the largest listing venue of ETFs, so that was natural as well.
Frankly, the New York Stock Exchange does really a great job. We wanted to thank our employees who worked so hard to pull this together, and so to be able to celebrate here at the Opening Bell is just a really fantastic way for us to be able to appreciate our employees and our partners.
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