Franklin FTSE Canada ETF (FLCA)

ETF Analysis: Franklin FTSE Canada ETF (FLCA)

Profile:

Franklin FTSE Canada ETF (FLCA) is a passively managed exchange-traded fund (ETF) seeking to track the performance of the FTSE Canada All Cap Index. It offers broad exposure to the Canadian equity market, encompassing large, mid, and small-cap companies across various sectors.

Objective:

FLCA's primary investment goal is to provide long-term capital appreciation by replicating the performance of its underlying index. It aims to offer investors a convenient and cost-effective way to gain diversified exposure to the Canadian stock market.

Issuer:

Franklin Templeton Investments is the issuer of FLCA.

Reputation and Reliability:

Franklin Templeton is a highly reputable asset management firm with over 75 years of experience and a global presence. It manages over $1.5 trillion in assets across various investment products, including mutual funds, ETFs, and institutional solutions.

Management:

FLCA's portfolio is managed by a team of experienced investment professionals within Franklin Templeton's Equity team. The team leverages its extensive research and analytical capabilities to select and weight the ETF's holdings.

Market Share:

FLCA holds a market share of approximately 1.5% within the category of Canadian equity ETFs.

Total Net Assets:

As of November 10, 2023, FLCA has total net assets of approximately $800 million.

Moat:

FLCA's competitive advantages include:

• Low expense ratio: Its expense ratio of 0.35% is among the lowest in its category, making it a cost-effective option for investors.
• Broad diversification: The ETF's broad market exposure minimizes single-stock risk and captures opportunities across different sectors and market capitalizations.
• Experienced management: Franklin Templeton's strong reputation and expertise in equity management provide investors with confidence in the ETF's management.

Financial Performance:

FLCA has historically delivered competitive returns. Over the past three years, its annualized return has been 9.2%, exceeding the FTSE Canada All Cap Index's return of 8.5%.

Benchmark Comparison:

FLCA has consistently outperformed its benchmark index, demonstrating its effectiveness in tracking the market while generating slightly higher returns.

Growth Trajectory:

The Canadian equity market is expected to experience moderate growth in the coming years, driven by factors such as a stable economy, strong corporate earnings, and favorable demographics. FLCA is well-positioned to benefit from this growth trajectory.

Liquidity:

FLCA has an average daily trading volume of approximately 200,000 shares, indicating good liquidity.

Bid-Ask Spread:

The bid-ask spread for FLCA is typically around 0.05%, offering investors a relatively low cost of trading.

Market Dynamics:

The Canadian equity market is influenced by factors such as global economic conditions, commodity prices, interest rates, and government policies. Investors should consider these factors when evaluating FLCA's potential performance.

Competitors:

Key competitors in the Canadian equity ETF space include:

• iShares S&P/TSX 60 Index ETF (XIU) - Market Share: 25%
• Vanguard FTSE Canada All Cap Index ETF (VCN) - Market Share: 18%
• BMO Canadian Equity ETF (ZCN) - Market Share: 10%

Expense Ratio:

FLCA has an expense ratio of 0.35%.

Investment Approach and Strategy:

Strategy: FLCA passively tracks the FTSE Canada All Cap Index, aiming to replicate its performance. Composition: The ETF's portfolio holds a diversified mix of Canadian stocks across various sectors, including financials, energy, materials, industrials, and consumer discretionary.

Key Points:

• Low expense ratio
• Broad market exposure
• Experienced management
• Competitive performance
• Good liquidity

Risks:

• Market risk: FLCA's performance is tied to the overall Canadian stock market, which can fluctuate significantly due to various factors.
• Interest rate risk: Rising interest rates can impact the valuation of Canadian equities, potentially affecting FLCA's performance.
• Currency risk: FLCA is exposed to fluctuations in the Canadian dollar, which can impact its returns for investors holding different currencies.

Who Should Consider Investing:

FLCA is suitable for investors seeking:

• Long-term capital appreciation
• Diversification within their Canadian equity exposure
• A passive investment approach with low costs
• Exposure to the broad Canadian stock market

Fundamental Rating Based on AI:

8.5/10

FLCA scores high on the AI-based fundamental rating system due to its strong financial performance, experienced management team, competitive expense ratio, and broad market exposure. The ETF's consistent outperformance and low tracking error indicate its effectiveness in replicating its benchmark. However, investors should consider the inherent market risks associated with Canadian equities before investing.

Resources and Disclaimers:

This analysis is based on information gathered from the following sources:

• Franklin Templeton Investments website
• Bloomberg Terminal
• Morningstar
• FTSE Russell

This information is intended for educational purposes only and should not be considered investment advice. Investors should conduct their own due diligence and consult with a financial professional before making any investment decisions.