Franklin Templeton has launched a range of enhanced indexing funds for UK investors, combining factor-based investing with a unique “conviction” signal derived from its fundamental managers.
The actively managed Franklin Core Enhanced Equity Index Funds cover UK, Europe ex-UK, US and global equities and are available as sub-funds of the Franklin Templeton Funds (FTF) OEIC range.
Developed and managed by the Franklin Templeton Investment Solutions (FTIS) team, the four strategies aim to reflect a “for portfolio allocators, by portfolio allocators” approach.
They are designed to stay close to their benchmarks while seeking incremental outperformance, serving as cost-efficient core building blocks within diversified portfolios.
Lisa Wang, Head of EMEA Investment Strategy at FTIS, said: “The challenge we set ourselves was to utilise 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 systematic.”
Officially launched in the UK on 10 April and available through a variety of platforms, the range consists of the following:
- FTF Franklin Core UK Equity Enhanced Index Fund
- FTF Franklin Core Europe ex UK Equity Enhanced Index Fund
- FTF Franklin Core US Equity Enhanced Index Fund
- FTF Franklin Core Global Equity Enhanced Index Fund
In each case the investment process begins with an active, factor-based quantitative strategy, which is then enhanced with the firm’s fundamental equity expertise through the use of the “conviction” factor.
Because fundamental stock selection tends to be less correlated with traditional quantitative factors, the conviction factor increases diversification within portfolios. The funds employ a tracking error of 1.25% under normal market conditions.
Harry Reeves, Franklin Templeton’s Head of UK Wholesale, said: “This new suite reflects our continued focus on broadening the range of solutions available to UK investors.
“The strategies are designed to complement both traditional index and active approaches. By embedding conviction within a quantitative framework, they can offer 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 that are competitive in fees with other enhanced indexing and factor-based solutions.”
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