Is Franklin U.S. Large Cap Multifactor Index ETF (FLQL) a Strong ETF Right Now?

Launched on 04/26/2017, the Franklin U.S. Large Cap Multifactor Index ETF (FLQL) is a smart beta exchange traded fund offering broad exposure to the Style Box - Large Cap Blend category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

The fund is managed by Franklin Templeton Investments, and has been able to amass over $1.26 billion, which makes it one of the larger ETFs in the Style Box - Large Cap Blend. This particular fund seeks to match the performance of the LibertyQ US Large Cap Equity Index before fees and expenses.

The LibertyQ US Large Cap Equity Index seeks to achieve a lower level of risk and higher risk-adjusted performance than the Russell 1000 Index over the long term by applying a multi-factor selection process, which is designed to select equity securities from the Russell 1000 Index that have favorable exposure to four investment style factors quality, value, momentum and low volatility.

Cost & Other Expenses

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Operating expenses on an annual basis are 0.15% for this ETF, which makes it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 1.35%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Information Technology sector - about 30.60% of the portfolio. Healthcare and Consumer Discretionary round out the top three.

When you look at individual holdings, Apple Inc (AAPL) accounts for about 6.92% of the fund's total assets, followed by Nvidia Corp (NVDA) and Microsoft Corp (MSFT).

Its top 10 holdings account for approximately 33.21% of FLQL's total assets under management.

Performance and Risk

The ETF has lost about -12.73% and is down about -1.83% so far this year and in the past one year (as of 04/08/2025), respectively. FLQL has traded between $49.92 and $62.24 during this last 52-week period.

FLQL has a beta of 0.93 and standard deviation of 16.67% for the trailing three-year period. With about 217 holdings, it effectively diversifies company-specific risk.

Alternatives

Franklin U.S. Large Cap Multifactor Index ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. There are other ETFs in the space which investors could consider as well.

IShares Core S&P 500 ETF (IVV) tracks S&P 500 Index and the Vanguard S&P 500 ETF (VOO) tracks S&P 500 Index. IShares Core S&P 500 ETF has $522.39 billion in assets, Vanguard S&P 500 ETF has $530.01 billion. IVV has an expense ratio of 0.03% and VOO charges 0.03%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Blend.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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This article originally published on Zacks Investment Research (zacks.com).

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