Portfolio Manager explains how Franklin Templeton manages ETF portfolios amid market uncertainty
In an exclusive feature by Wealth Professional, Franklin Templeton’s multi-asset strategies demonstrate a disciplined approach to navigating a complex market environment.
Michael Greenberg, portfolio manager at Franklin Templeton, emphasizes the vast array of exchange-traded funds (ETFs) in Canada, noting, “There are actually more ETFs in the Canadian market than there are stocks.”
This abundance offers investors numerous opportunities but also comes with potential risks for those less prepared.
Greenberg acknowledges the ease of accessing ETFs has changed the investment landscape, enabling investors to quickly enter various market sectors or themes.
However, he warns this accessibility can lead to ‘bad behaviour,’ such as chasing trends and falling into common investment pitfalls like buying high and selling low.
Franklin Templeton’s multi-asset ETF strategy strikes a balance between passive and active management. Greenberg explains that the company uses passive ETFs for broad market exposure while leveraging active management in areas where they believe there’s potential to generate higher returns.
This blend of low-cost ETFs and dynamic active management aims to provide robust diversification across asset classes and sectors, allowing portfolios to be adjusted as market conditions evolve.
“There are times to be more aggressive in the portfolios and pursue more upside,” Greenberg explains, “and there are times to play defence.”
On the fixed-income side, Franklin Templeton favours active management, prioritizing government bonds and higher-duration assets to buffer against equity risks.
Greenberg points out that Franklin Templeton's underlying managers, including Western Asset Management and Brandywine Global, play a key role in managing these portfolios, especially in volatile conditions.
Franklin Templeton has also launched a new all-equity portfolio, targeting higher-growth investors willing to take on more risk. This portfolio is well-diversified across domestic and international stocks, covering developed and emerging markets.
According to Greenberg, while the US equity market remains a focus, the team is diversifying beyond the ‘Magnificent Seven’ tech stocks that have dominated recent rallies, adding more value stocks to navigate volatility.
Franklin Templeton Investment Solutions (FTIS) has recently reduced its stock exposure amid concerns about slowing economic data and stretched valuations. Greenberg adds that the team has increased cash holdings as a precaution for potential future opportunities.
“We still like the US equity market and have a bit more exposure to emerging markets as well,” Greenberg notes. However, exposure to China has been reduced, with a stronger focus on Japan due to favourable currency dynamics as Japan raises interest rates.
Advisors are integrating Franklin Templeton’s multi-asset ETF portfolios in several strategic ways. Greenberg explains that some advisors use these portfolios to manage smaller client accounts through a segmentation strategy, freeing up time to focus on larger clients.
“They’ll pick the right risk tolerance, put the clients in these portfolios, know that they’re being actively managed at a very good fee, and delegate the investment management to a team like us,” Greenberg says.
These portfolios, now available as ETF series with management fees as low as 13 basis points, are also being used by advisors as part of larger portfolio strategies.
“They’re not delegating the whole portfolio to us, but they’re using us for 50 to 60 percent of the overall portfolio and then building around it,” Greenberg adds. This approach allows advisors to focus on more value-added services while ensuring clients receive active, low-cost portfolio management.
Franklin Templeton’s combination of passive and active management continues to position its multi-asset ETF strategies as a flexible and cost-effective solution for both investors and advisors alike.
