Major equity indexes appear to have resumed their uptrend following a minor pullback after the Fed’s “no taper” decision last week. With all eyes are on tomorrow’s monthly U.S. employment report, stocks could be setting up for a volatile day of trading as speculation over the Fed’s next shift in monetary policy will come into the spotlight. Mutual fund veteran Franklin Templeton made its entrance into the ETF industry earlier this week when it rolled out its first offering, an actively managed short-duration U.S. government bond fund [see 5 ETF Alternatives to Troubled Treasuries].
The Franklin Short Duration U.S. Government ETF (FTSD) seeks to provide investors with a high level of current income while still focusing on capital preservation; as such, this ETF will invest at least 80% of its net assets in securities issued or guaranteed by the U.S. government or its agencies [see Better-Than-AGG Total Bond Market ETFdb Portfolio].
FTSD’s portfolio management team has more than 30 years of combined experience in the asset management space and will look to analyze interest rate, inflation, and risk premium trends in addition to a host of other factors when aligning the portfolio’s strategy. The new ETF targets an estimated average portfolio duration of three years or less, with the flexibility to invest across several investment grade debt securities, including:
- Treasury Inflation-Protected Securities (TIPs)
- Adjustable Rate Mortgages (ARMs)
- Mortgage-Backed Securities (MBS)
The new FTSD charges 0.30% in annual expense fees and is sure to face some stiff competition from established funds in the Government Bonds and Money Market categories that also target investment-grade, short-term duration debt securities. Some of the biggest players that FTSD will go head-to-head with include:
- PIMCO Enhanced Short Maturiy Exchange-Traded Fund (MINT, A+)
- iShares Barclays 1-3 Year Treasury Bond Fund (SHY, A-)
- iShares Barclays Short Treasury Bond Fund (SHV, A-)
- Guggenheim Enahnced Short Treasury Bond Fund (BIL, A)
The new FTSD fund from Franklin Templeton warrants a closer look under the hood from anyone looking to put idle cash to work without dipping their toes in the stock market.
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Disclosure: No positions at time of writing.
- Franklin Templeton