Franklin Templeton's Low-Cost ETF Trio: A Strategic Play in Volatile Markets

Franklin Templeton Canada has entered the ETF arena with a bold move: three new low-cost core equity ETFs designed to offer diversified exposure to global markets at an unprecedented price point. Launched on June 25, 2025, the Franklin Canadian Core Equity ETF (FCRC), Franklin U.S. Core Equity ETF (FCRU), and Franklin International Core Equity ETF (FCRI) carry a combined expense ratio of just 0.10%—among the lowest in their class—thanks to a temporary management fee waiver. This strategic timing, amid heightened market volatility driven by trade tensions and supply chain pressures, positions these ETFs as potential cornerstones for investors seeking cost-effective, active management in uncertain times.

The Fee Structure Advantage

The Franklin Core Equity ETFs stand out in a crowded market due to their pricing. While each fund has a base management fee of 0.25%, this is fully offset by a waiver until December 31, 2025. Only an administrative fee of /0.10% remains, making these ETFs competitive with many passive index funds. Compare this to similar actively managed ETFs, which often charge between 0.50% and 1.00%, and the value proposition becomes clear.

The waiver's temporary nature is a caveat, but Franklin's decision to launch at this price signals confidence in their ability to attract assets. Investors should note that fees may revert to 0.25% post-2025, so locking in the current rate could be advantageous for long-term holdings.

Timing the Volatile Market

Franklin's launch aligns with a period of significant uncertainty. Q2 2025 saw equity markets oscillate as trade disputes flared and the Federal Reserve hinted at potential rate cuts to support growth. Franklin's investment teams have emphasized cautious optimism, particularly in mega-cap equities and sectors like European infrastructure and defense, which they view as resilient amid geopolitical risks.

Historical data reveals that buying these ETFs on Fed decision days has historically resulted in positive performance for FCRC, with average gains, while FCRU remained stable and FCRI experienced slight declines—likely due to sector-specific factors. This underscores the strategic advantage of FCRC in capturing Fed-driven market movements, aligning with its focus on Canadian equities and resilient sectors.

Franklin's broader strategy reinforces this confidence. Their Q2 results showed $7.4 billion in net inflows for core strategies and $4.1 billion in ETF inflows alone, marking the 14th consecutive quarter of growth. The firm's focus on operational efficiency—targeting $200–$250 million in annual cost savings by 2026—also suggests a commitment to maintaining competitive pricing even after the waiver expires.

The Case for Active Management in a Passive World

While passive ETFs dominate the low-cost space, Franklin's active approach offers distinct advantages. Their global investment team, managing over $1.57 trillion in assets, brings decades of experience to equity selection. Over a 10-year horizon, 63% of Franklin's composite strategies outperformed benchmarks, a testament to their disciplined approach.

In volatile markets, active management can navigate sector rotations and avoid overexposure to lagging industries. For instance, Franklin's focus on European infrastructure aligns with anticipated spending on energy transition projects, a theme likely to gain traction as geopolitical risks persist.

Risks and Considerations

Investors must weigh the benefits against inherent risks. The fee waiver's expiration could push costs higher, though Franklin's track record in cost management suggests they may find ways to keep fees low. Additionally, active management carries its own risks: underperformance relative to benchmarks is possible, even with a strong team.

Sector-specific risks: While FCRC may benefit from Fed-driven strategies, FCRI's performance can be influenced by unrelated sector dynamics, as seen in its slight decline post-rate decisions, necessitating ongoing sector analysis.

Market volatility itself remains a wild card. While Franklin's strategies target resilience, no fund is immune to broader downturns. The ETFs also lack principal guarantees, and past performance does not ensure future results.

Investment Takeaways

For investors seeking:
1. Cost-effective equity exposure: The Franklin Core Equity ETFs offer active management at a price rivaling passive funds.
2. Global diversification: The trio covers Canadian, U.S., and international markets, allowing for tailored allocations.
3. Franklin's institutional-grade strategy: Backed by a firm with deep resources and a long-term track record.
4. Historical performance during Fed rate decisions: Backtests indicate FCRC's responsiveness to Fed-driven market shifts, making it a strategic entry point during policy announcements.

Consider these ETFs if:
- You prioritize low fees but want active management's flexibility.
- You believe in Franklin's ability to navigate sector-specific opportunities amid volatility.
- You're looking to build a diversified portfolio without overpaying for broad market access.

Avoid if:
- You're purely cost-focused and prefer passive funds.
- You distrust active management's ability to outperform in a low-growth environment.

Final Thoughts

Franklin Templeton Canada's new ETFs are a bold bid to redefine the cost-performance equation in active equity investing. With a 0.10% fee structure and a global team managing trillions, they offer investors a compelling tool to weather volatility. The backtest results further affirm FCRC's potential as a responsive tool during Fed policy shifts, complementing its low-cost structure and Franklin's active management expertise. While the waiver's expiration is a note of caution, Franklin's broader strategic moves—including their $37 billion ETF business and digital asset initiatives—suggest this is more than a one-off product launch. For the right investor, FCRC, FCRU, and FCRI could be foundational holdings in a volatile market.

As always, consult a financial advisor before making investment decisions, and review the ETF facts and prospectus for full risk disclosures.