Franklin Templeton has launched a range of enhanced indexing funds for UK investors which combine systematic factor-based investing with a proprietary “conviction” signal derived from its fundamental managers. Covering UK, Europe ex-UK, US and global equities, the actively managed strategies are available as sub-funds of the Franklin Templeton Funds (FTF) OEIC range.
The strategies translate stock-picking insights from Franklin Templeton’s fundamental managers into an additional source of return within a systematic framework. Designed to stay close to their benchmarks while seeking incremental outperformance, the funds are intended to serve as cost-efficient core building blocks within diversified portfolios.
Developed and managed by the Franklin Templeton Investment Solutions (FTIS) team, the four strategies reflect a “for portfolio allocators, by portfolio allocators” approach, combining systematic investing with insights drawn from Franklin Templeton’s active equity capabilities.
Harry Reeves, Head of UK Wholesale at Franklin Templeton, said:
“This new suite of OEIC funds reflects our continued focus on broadening the range of solutions available to UK investors. These strategies are designed to complement both traditional index and active approaches. By embedding conviction within a quantitative framework, they are a cost‑efficient alternative to full active management, while retaining a disciplined approach to risk and diversification.
“As portfolio construction continues to evolve, we believe approaches that combine different investment disciplines can play a valuable role in helping clients build resilient, cost-conscious portfolios which are competitive in fees with other enhanced index and factor-based solutions.”
Key features of the Franklin Core Enhanced Equity Funds:
The Franklin Core Enhanced Equity Funds are built on a time-tested process that draws on the firm’s 40-plus years of experience at the forefront of quantitative investing. They start with an active, factor-based quantitative strategy, which is then enhanced with Franklin Templeton’s fundamental equity expertise through a proprietary “conviction” factor.
Analysis by FTIS has shown the conviction factor to be less correlated to other more traditional quantitative factors, thereby increasing diversification within the portfolios through its inclusion. The funds also feature a tracking error risk-control overlay, supporting downside resilience and tight benchmark alignment.
In addition, proprietary risk management allows the funds to target alpha driving factors and mitigate any unwanted exposures or incidental tilts. The process draws on both Franklin Templeton’s long history of innovation in the quantitative arena and the firm’s 75-plus years of experience in active management.
Lisa Wang, Head of EMEA Investment Strategy at FTIS, said:
“The challenge we set ourselves was to harness our active managers’ proven skills by transforming their qualitative insights into a systematic factor. By extracting this ‘conviction’ factor from managers’ research-intensive stock selection, we can add a valuable extra layer of investment insight to an underlying process that remains fully systematic and tightly risk managed.”
The Franklin Core Enhanced Equity Funds seek to deliver above-market returns while limiting deviation from their benchmark indices. They target a tracking error of 1.25% during normal market conditions. They are the first systematic equity products in the UK to integrate the in-depth fundamental research insights of Franklin Templeton’s active managers.
The funds are managed by a seasoned team that includes Brett E. Risser, Head of Quantitative Equity Portfolio Management; Jacqueline Hurley Kenney, Head of Solutions Research; and Adrian Chan, Head of Quantitative Investments.Each team member brings deep expertise in quantitative research and portfolio management.
Officially launched in the UK on 10th April and available through a variety of platforms, the Franklin Core Enhanced Equity Funds range consists of the following:
- FTF Franklin Core UK Equity Enhanced Index Fund2
- FTF Franklin Core Europe ex UK Equity Enhanced Index Fund2
- FTF Franklin Core US Equity Enhanced Index Fund2
- FTF Franklin Core Global Equity Enhanced Index Fund2
Harry Reeves added:
“We believe this is the kind of product UK advisers and their clients will value in a challenging global backdrop. We expect a healthy appetite for strategies that can serve as core building blocks in portfolios, deliver more consistent outperformance against their benchmarks and keep a tight rein on tracking error.”
Franklin Templeton Investment Solutions (FTIS) is a global leader in multi-asset, quantitative and hedged solutions, offering clients a single point of access to public and private market capabilities. Through deep research, active management and data-driven insights, FTIS creates customised solutions designed to meet the evolving needs of investors in an increasingly complex market environment.
