Investors have a ton on their plate this year, from inflation to rising rates to the prospect of a recession in the second half of the year. Every asset manager takes on this challenge differently, and at Franklin Templeton, the name of the game for 2023 looks to be the continued strength of current income — particularly dividends, according to Franklin Templeton head of ETF product and capital markets David Mann.
Speaking at the Exchange conference in Miami this week, Mann underscored the continued importance of dividends for investors as a priority for the firm this year, with the question of whether the Fed will cut rates after further hikes being particularly notable.
“Having funds that are in the right place at the right time, where investors are concerned about market volatility there, they want that income and have like a rules-based approach that gets that it’s been a great story,” Mann explained, pointing to the firm’s Franklin U.S. Low Volatility High Dividend Index ETF (LVHD ).
On the other end of the product continuum, he explained, are products that almost take a “passive plus” view, with a low-tracking, low-cost approach with a little tweak, that aren’t active or smart beta, but add an income lean. One example may be the Franklin Emerging Market Core Dividend Tilt Index ETF (DIEM ), which tracks the Morningstar Emerging Markets Dividend Enhanced Select Index and had a 30-day SC Yield of 5.89% as of January 31.
At the same time, Mann, who also writes a monthly LinkedIn newsletter titled “One Mann’s ETF Opinion,” underlined that should more growth offerings prevail in a “counterargument” to sticky inflation in which rates do come back down, the firm does have strategies for that scenario.
Those include a recently covered mutual fund from Martin Currie with a sustainable screen, the Martin Currie Sustainable International Equity ETF (MCSE ), as well as other more thematic growth strategies from the firm that have picked up steam in recent weeks, like the Franklin Intelligence Machines ETF (IQM ), which has returned 13.5% over one month.
Mann also spoke to the firm’s fixed income and bond offerings, highlighting its belief in municipal bonds this year. With a rebound year on the cards for municipals, that rend could possibly converge with increasing investor familiarity and comfort with the operational efficiencies of the wrapper.
But in terms of flows, the shop’s single-nation and regional ETFs have led the way. The Franklin FTSE South Korea ETF (FLKR ) has added $121.3 million YTD, according to VettaFi, while the Franklin FTSE Europe ETF (FLEE ) has seen a turnaround from one-year outflows, adding $63 million since the start of 2023.
“China’s COVID lockdown is starting to end, and a lot of people have an opinions about China. We’re seeing that as an investment thesis,” Mann said, detailing the shop’s view on certain international trends. “The supply chain’s starting to hopefully ease a little bit with the chips, so Taiwan and Korea start becoming interesting. Japan with monetary policy, all of a sudden the yen maybe isn’t going to be so weak against the dollar. Let’s go look at Japanese equities.”
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