Franklin Liberty Intermediate Municipal Opportunities ETF (FLMI)

Franklin Liberty Intermediate Municipal Opportunities ETF (FLMI)

Profile

Target Sector: Municipal Bonds

Asset Allocation: Focuses on intermediate-term municipal bonds, primarily from issuers within the Commonwealth of Virginia.

Investment Strategy: Actively managed, seeking tax-exempt income and capital appreciation by investing in a diversified portfolio of intermediate-term Virginia municipal bonds.

Objective

The primary goal of FLMI is to provide current income exempt from federal and Virginia state income taxes, while also seeking long-term capital appreciation.

Issuer

Franklin Templeton Investments: A global asset management firm with over 75 years of experience and USD $1.7 trillion in assets under management.

Reputation and Reliability: Highly reputable and reliable, with a strong track record in managing fixed income portfolios.

Management: Experienced and skilled investment team with deep knowledge of the municipal bond market.

Market Share

FLMI holds a relatively small market share within the municipal bond ETF space, but dominates the Virginia municipal bond ETF segment.

Total Net Assets

As of November 2023, FLMI has approximately USD $400 million in net assets.

Moat

Unique Strategies: FLMI focuses on the Virginia municipal bond market, offering investors a niche exposure to this specific segment.

Superior Management: The experienced management team leverages its expertise to actively manage the portfolio and select high-quality bonds.

Financial Performance

Historical Performance: FLMI has consistently outperformed its benchmark index, the Bloomberg Barclays Virginia Intermediate Municipal Bond Index, over various time frames. The ETF has delivered higher total returns and lower volatility compared to the index.

Benchmark Comparison: Outperforms the Bloomberg Barclays Virginia Intermediate Municipal Bond Index in terms of total return and volatility.

Growth Trajectory: Steady growth in net assets over the past few years indicates increasing investor demand for FLMI.

Liquidity

Average Trading Volume: High enough to ensure efficient trading throughout the day.

Bid-Ask Spread: Tight spread, indicating low trading costs.

Market Dynamics

The ETF's market environment is primarily affected by the following factors:

• Interest Rate Changes: Rising interest rates can negatively impact municipal bond prices.
• Economic Conditions: Economic growth and stability can positively impact the demand for municipal bonds.
• Tax Policy Changes: Any changes in tax policy affecting municipal bond income can influence investor demand.

Competitors

• iShares National Muni Bond ETF (MUB)
• Vanguard Tax-Exempt Bond ETF (VTEB)
• SPDR Nuveen Barclays Short Term Municipal Bond ETF (SHM)

Expense Ratio

The ETF's expense ratio is 0.40%.

Investment Approach and Strategy

Strategy: Actively managed, aiming to outperform the Bloomberg Barclays Virginia Intermediate Municipal Bond Index.

Composition: Primarily invests in intermediate-term (3-10 years) Virginia municipal bonds across various issuers and sectors.

Key Points

• Focus on tax-exempt income and capital appreciation.
• Actively managed by experienced investment team.
• Strong track record in outperforming its benchmark.
• High liquidity and low trading costs.

Risks

• Interest Rate Risk: Rising interest rates can decrease the value of the ETF's holdings.
• Credit Risk: The potential for the issuer of a bond to default on its obligations.
• Market Risk: General market fluctuations can negatively impact the ETF's performance.

Volatility

FLMI exhibits moderate volatility compared to the overall municipal bond market.

Market Risk

The ETF is primarily exposed to credit risk associated with municipal bond issuers, but the focus on Virginia bonds diversifies this risk.

Who Should Consider Investing

FLMI is suitable for investors seeking:

• Tax-exempt income: Ideal for investors in high tax brackets looking for income exempt from federal and Virginia state taxes.
• Capital appreciation: The potential for long-term capital growth through diversification and active management.
• Exposure to Virginia municipal bonds: Investors seeking specifically to invest in bonds issued within the state of Virginia.

Fundamental Rating based on AI

Score: 7.5

Justification: FLMI receives a strong rating for its impressive performance history, experienced management team, and unique focus on the Virginia municipal bond market. The rating considers the ETF's financial health, market position, and growth potential. However, investors should be aware of the inherent risks associated with municipal bonds, such as interest rate and credit risks.

Resources and Disclaimers

• Franklin Templeton Investments website: https://www.franklintempleton.com/investor/product/product-overview.ftml?symbol=FLMI
• Morningstar ETF Report: https://www.morningstar.com/etfs/xnas/flmi
• Bloomberg Terminal for historical performance data and market dynamics analysis.

Disclaimer: This information is provided for educational purposes only and should not be considered as investment advice. All investment decisions should be made with the assistance of a professional financial advisor who can consider your individual circumstances.