Franklin Templeton Plans to Convert Two Mutual Funds to ETFs

Rhea-AI Summary

Franklin Templeton plans to convert two mutual funds—the BrandywineGLOBAL Dynamic US Large Cap Value Fund and the Martin Currie International Sustainable Equity Fund—into ETFs, aiming to expand its suite of actively managed ETFs to 24. These conversions, pending shareholder approval, are expected in Q3 or Q4 2022. The funds have a track record of strong performance, with Brandywine having over $227 million and Martin Currie over $26 million in net assets as of November 30, 2021. The initiative aligns with the growing demand for active ETFs, which have seen a 63% AUM growth rate over three years.

Positive

• Conversion of two mutual funds to ETFs aligns with growing investor demand for active ETF products.
• BrandywineGLOBAL and Martin Currie funds demonstrate strong past performance, enhancing credibility.
• Expanding the ETF line-up to 24 increases market presence and investment solutions for clients.

Negative

• None.

Addition of ETFs from Brandywine Global and Martin Currie Would Expand Suite of Actively Managed ETFs to 24

SAN MATEO, Calif.--(BUSINESS WIRE)-- Franklin Templeton today announced plans to convert two mutual funds to ETFs. Each of BrandywineGLOBAL - Dynamic US Large Cap Value Fund and Martin Currie International Sustainable Equity Fund has longer than a 5-year track record and top quartile Morningstar performance.¹ The conversions, subject to shareholder approval, are expected to be effective in the third or fourth quarter of 2022. Brandywine Global Investment Management, LLC and Martin Currie Inc. are specialist investment managers of Franklin Templeton.

“The two mutual funds that we plan to convert to ETFs are investment strategies that have delivered exceptional results and are managed in a fashion that fits well in an ETF wrapper,” said Pierre Caramazza, Head of U.S. Product and Specialty Sales for Franklin Templeton. “The addition of these new ETFs would expand our line up in the actively managed U.S. large cap value and international growth spaces, where we have strong investment capabilities among our specialist investment managers.”

Patrick O’Connor, Head of Global ETFs for Franklin Templeton, said, “Active ETFs have experienced phenomenal growth, with a 3-year compound annual AUM growth rate of 63%.² We believe that client demand will continue to increase as investors seek active insights combined with the benefits of the ETF structure. With these ETF conversions, we are best leveraging the capabilities of our diversified investment management teams to meet the evolving needs of our clients.”

BrandywineGLOBAL – Dynamic US Large Cap Value Fund seeks long-term capital appreciation by quantitatively investing in U.S. equities. The fund normally invests at least 80% of its net assets in equity securities of U.S. large capitalization companies. The mutual fund had net assets of over $227 million as of November 30, 2021.

Martin Currie International Sustainable Equity Fund strives to provide long-term capital appreciation by investing in equity and equity-related securities of foreign companies. The fund has a strong focus on environmental, social and governance (ESG) management and typically invests a minimum of 80% of its assets in securities that meet Martin Currie’s ESG criteria. The mutual fund had net assets of over $26 million as of November 30, 2021.

Each new ETF would be managed in a substantially similar manner as the corresponding mutual fund, and the ETF investment objective, principal investment strategies, primary subadviser and portfolio management team would be the same as that of the corresponding mutual fund.

Franklin Templeton’s ETF platform is designed to seek better client outcomes through a diverse and innovative product suite offered across asset classes and geographies. Over 55 ETFs are offered in the U.S., providing solutions for a range of market conditions and investment opportunities through active, smart beta and passively managed ETFs. Our U.S. ETF platform has approximately $9.7 billion in assets under management as of November 30, 2021, and is supported by the strength and resources of one of the world’s largest asset managers. Gather insights on ETF investing by visiting franklintempleton.com/etfs and following Franklin LibertyShares on Twitter: @libertyshares.

About Franklin Templeton

Franklin Resources, Inc. [NYSE:BEN], is a global investment management organization with subsidiaries operating as Franklin Templeton and serving clients in over 165 countries. Franklin Templeton’s mission is to help clients achieve better outcomes through investment management expertise, wealth management and technology solutions. Through its specialist investment managers, the company brings extensive capabilities in equity, fixed income, multi-asset solutions and alternatives. With offices in more than 30 countries and approximately 1,300 investment professionals, the California-based company has over 70 years of investment experience and over $1.5 trillion in assets under management as of November 30, 2021. For more information, please visit franklintempleton.com and follow us on LinkedIn, Twitter and Facebook.

Important Information

Past performance does not guarantee future results. Equity securities are subject to price fluctuation and possible loss of principal. Fixed-income securities involve interest rate, credit, inflation, and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed income securities falls. High yield bonds are subject to greater price volatility, illiquidity, and possibility of default. International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. A managers’ environmental social and governance (ESG) investment strategies may limit the types and number of investment opportunities available and, as a result, may underperform strategies that are not subject to such criteria. Active management does not ensure gains or protect against market declines.

Before investing, carefully consider a Fund’s investment objectives, risks, charges and expenses. You can find this and other information in each prospectus, or summary prospectus, if available, which is available at www.franklintempleton.com. Please read it carefully.

Franklin Distributors, LLC., member FINRA/SIPC, and a Franklin Templeton affiliated company.

Copyright © 2021. Franklin Templeton. All rights reserved.

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¹ Source Morningstar as of 11/30/2021. Morningstar Percentile Rankings are based on a fund’s total returns relative to all funds in the same category. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. Calculations assume the reinvestment of distributions and exclude sales charges, if any. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100. The top-performing fund in a category will always receive a rank of 1. Morningstar Inc. is an independent investment research firm that compiles and analyzes fund, stock and general market data. A high ranking does not necessarily imply that a fund achieved positive results for the period. Rankings shown are for Class I shares. Other share classes have different expense structures and performance characteristics. Classes have a common portfolio. Past performance and is no guarantee of future results. BrandywineGLOBAL - Dynamic US Large Cap Value Fund’s Morningstar peer group category is U.S. Fund Large Value. Class I ranked 14th (147/1221 funds) for the 1-year period, 19th (186/1186 funds) for the 3-year period, 19th (181/1131 funds) for the 5-year period. Martin Currie International Sustainable Equity Fund’s Morningstar peer group is U.S. Fund Foreign Large Growth. Class I ranked 12th (39/449 funds) for the 1-year period, 13th (49/420 funds) for the 3-year period, 13th (45/393 funds) for the 5-year period. On September 30, 2021, the Martin Currie International Sustainable Equity Fund implemented changes to its name and investment policy, specifying that it will invest at least 80% of its assets in securities that meet environmental, social and governance criteria.

² Source Morningstar as of 11/30/2021 for U.S. Active ETFs.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211214006299/en/

Franklin Resources, Inc.

Corporate Communications:

Pholida Barclay, (212) 632-3204, pholida.barclay@franklintempleton.com

franklinresources.com

Source: Franklin Templeton

FAQ

What mutual funds is Franklin Templeton converting to ETFs?

Franklin Templeton is converting the BrandywineGLOBAL Dynamic US Large Cap Value Fund and the Martin Currie International Sustainable Equity Fund to ETFs.

When are the conversions of the mutual funds to ETFs expected to be effective?

The conversions are expected to be effective in the third or fourth quarter of 2022, pending shareholder approval.

What is the significance of the mutual funds' past performance?

Both funds have a top quartile Morningstar performance ranking, indicating strong historical returns and management quality.

How much AUM growth have active ETFs experienced recently?

Active ETFs have experienced a compound annual AUM growth rate of 63% over the last three years.

What is the current asset under management for Franklin Templeton's ETF platform?

As of November 30, 2021, Franklin Templeton's U.S. ETF platform had approximately $9.7 billion in assets under management.