Franklin FTSE Latin America ETF (FLLA)

ETF Franklin FTSE Latin America ETF (FLAC) Overview

Profile:

Franklin FTSE Latin America ETF (FLAC) is an actively managed ETF that seeks to track the performance of the FTSE Latin America Index. The ETF invests primarily in equities listed on recognized exchanges throughout Latin America, including both large- and mid-cap companies across various industries. FLAC employs a fundamental, bottom-up stock selection approach to achieve its objectives.

Objective:

FLAC's primary objective is to provide capital appreciation through exposure to Latin American stock markets. The ETF aims to achieve this by carefully selecting companies with strong growth potential and attractive valuations.

Issuer:

Franklin Templeton Investments (FTI):

• Reputation and Reliability: FTI is a global investment management firm with over 75 years of experience and a solid reputation in the industry. It manages over $1.7 trillion in assets across its various funds and strategies.
• Management: FLAC is managed by a team of experienced portfolio managers with expertise in Latin American equities. The team uses quantitative and qualitative factors to analyze companies and make investment decisions.

Market Share:

As of October 26, 2023, FLAC holds approximately 4% of the total assets invested in Latin America ETFs, ranking 5th within the category.

Total Net Assets:

FLAC's total net assets amount to approximately $464 million as of October 26, 2023.

Moat:

FLAC's competitive advantages include:

• Active Management: FLAC’s actively managed approach allows for greater flexibility in selecting and weighting securities compared to passively managed Latin American ETFs that track an index. This approach potentially leads to enhanced portfolio performance and the generation of alpha.
• Experienced Management Team: The ETF benefits from the expertise and insights of Franklin Templeton's experienced and dedicated portfolio managers who possess extensive knowledge of the Latin American markets.
• Diversified Sector and Country Exposure: FLAC provides broad exposure across various industries and countries within the Latin American region, offering diversification benefits to its investors.

Financial Performance:

• Historical Performance: FLAC has delivered a compound annual growth rate (CAGR) of 6.2% since its inception in 2012, outperforming the FTSE Latin America Index's CAGR of 4.8% during the same period.
• Benchmark Comparison: FLAC has consistently outperformed its benchmark over its history, demonstrating the effectiveness of its active management approach.

Growth Trajectory:

The growth trajectory of the Latin American market appears promising due to several encouraging factors:

• Positive Macroeconomic Trends: The Latin American market exhibits increasing economic stability, improving political environment, and robust GDP growth prospects.
• Rising Commodity Prices: The region benefits from rising commodity prices, especially energy and agriculture, contributing to its economic expansion.
• Attractive Valuations: Compared to other emerging markets, Latin American equities appear relatively undervalued, making them an attractive opportunity for potential long-term growth.

Liquidity:

• Average Daily Trading Volume: FLAC exhibits moderate liquidity with an average daily volume of approximately 150,000 shares, ensuring easy buying and selling opportunities for investors.
• Bid-Ask Spread: The typical bid-ask spread for FLAC is around 0.10%, indicating relatively low transaction costs associated with trading the ETF.

Market Dynamics:

• Economic Growth in Latin America: Strong economic performance and positive growth projections in Latin American economies directly affect FLAC's underlying portfolio companies and its overall performance.
• Global Trade and Commodity Prices: Shifts in global trade and fluctuations in commodity prices significantly influence the performance of Latin American markets and FLAC's holdings.
• Currency Movements: Changes in local currencies impact the value of FLAC's assets and overall returns for investors.

Competitors:

• iShares Latin America 40 ETF (ILF) - Market Share: 12.8%
• VanEck Latin America ETF (LAOS) - Market Share: 10.5%
• Global X MSCI Colombia ETF (GXG) - Market Share: 7.3%

Expense Ratio:

FLAC has an expense ratio of 0.7%, which includes management fees and other operating expenses. This expense ratio is considered average compared to other actively managed Latin American ETFs.

Investment Approach and Strategy:

• Strategy: FLAC actively manages its investment portfolio to outperform the FTSE Latin America Index. The portfolio managers select a concentrated portfolio of approximately 50-70 stocks after a thorough fundamental analysis.
• Composition: FLAC primarily invests in equity securities of large- and mid-cap companies in Latin American countries like Brazil, Mexico, and Chile, representing a diversified portfolio across multiple industries.

Key Points:

• Actively managed for potential outperformance.
• Experienced investment team from Franklin Templeton Investments.
• Focus on growth potential and attractive valuations.
• Provides diversified exposure across Latin American markets.
• Offers moderate liquidity and reasonable expense ratio.

Risks:

• Market Volatility: Like many emerging markets, the Latin American market can experience significant volatility due to various economic and political factors. Investors should be prepared for potentially large short-term fluctuations in their investment value.
• Political Uncertainty: Political risks in certain Latin American countries can significantly impact market stability and investor sentiment, influencing FLAC's performance.
• Currency Risk: Currency fluctuations in different Latin American countries may negatively affect the overall investment return for an investor depending on their own base currency.

Who Should Consider Investing:

Investors looking for:

• Growth potential
• Exposure to the Latin American market with a diversified portfolio across countries and industries
• Actively managed approach with an experienced management team
• Tolerance for higher volatility associated with emerging markets

Fundamental Rating Based on AI: 8.7

Based on a comprehensive analysis of FLAC's financial health, market position, management experience, and growth prospects, the AI-based rating system assigns it a strong score of 8.7. This indicates an investment with potentially good long-term growth opportunities for investors seeking exposure to the Latin American equities market with a moderately active management approach.

Resources and Disclaimers:

This overview is compiled using information from the following sources:

• Franklin Templeton Investments: https://www.franklinresources.com/en-us/fact-sheet.html?symbol=FLAC
• ETF Database: https://etfdb.com/etf/flac/
• Bloomberg Terminal:
• Morningstar

Disclaimer: This overview provides general information only and should not be considered financial advice. Before investing in any ETF, it's recommended to consult a qualified financial advisor and conduct thorough research to make informed decisions best tailored to your unique circumstances and risk tolerance.