ETF Leaders Powered by the NYSE: Franklin Templeton's Jenny Johnson

When thinking about active versus passive management, Franklin Templeton president and CEO Jenny Johnson uses the analogy of having to buy a car to “get from point A to B as quickly as you can safely.” If the path from point A to B “is a straight, well-paved road, and you want to go as cheap as you can per mile, you would buy a car without any safety features.” That’s passive.

“But if you have to take that car through the mountains and you have a snowstorm, you’re going to want to have paid up for the safety features in a car,” she said at Exchange: An ETF Experience 2022. To Johnson, that’s the advantage that active management can bring.

Speaking with NYSE’s Judy Shaw for “ETF Leaders, Powered by the New York Stock Exchange,” Johnson explained that we’ve “just come off a decade of a massive amount of government intervention,” where the government was “essentially printing money.” This “has created an environment and low interest rates where it was like a straight well-paved road.”

But in “an environment where you have the war in Russia and Ukraine affecting commodity prices, affecting supply chains, the lockdown in China,” as well as the COVID pandemic persisting, investors are now driving through the mountains in that snowstorm.

“That’s when active management matters,” said Johnson.

Filling in Gaps and Providing Additional Services

Franklin Templeton has made seven acquisitions in the last two years. These acquisitions were done not just to fill in some products gaps, but to also add some geographical and technological capabilities that would provide additional services to the firm’s clients.

The manager had 18 independent investment teams, so it was important to create an environment that fostered “collaboration across those teams,” which would “deliver better outcomes for” Franklin Templeton’s clients.

“There’s a lot going on in the world, and so it’s [about] making sure that our investment teams are well resourced and we’re able to bring the best of the firm to our clients,” Johnson said.

Cheap Beta, Muni Bonds, and Low Volatility

When discussing her favorite ETFs in Franklin Templeton’s lineup, Johnson first gave a shoutout to the firm’s country beta ETFs, which she said “are the cheapest in the market.”

“To us, beta should be cheap, because it has no risk controls around it,” she said.

Johnson then singled out the Franklin Dynamic Municipal Bond ETF (FLMI), an actively managed fund that invests in municipal securities.

“I think it’s a good time for active management,” said Johnson “As rates go up, you really need credit applying to munis.”

Franklin Templeton’s CEO also noted that “in this type of market where it feels like there’s a little bit more risk going on in the world,” the Franklin U.S. Low Volatility High Dividend Index ETF (LVHD) may be worth considering.

“Having something that’s low volatility really takes down the risk, but you’re still staying active in the equity markets, and you’re getting paid to be in there with high dividends,” said Johnson.

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