Franklin U.S. Small Cap Multifactor Index ETF

Franklin U.S. Small Cap Multifactor Index ETF (FLQS) is an index fund that tracks the LibertyQ U.S. Small Cap Equity Index. FTSE Russell builds that index by picking stocks from the Russell 2000 based on four traits: quality, value, momentum and low volatility. As of June 30, 2026, the fund held 495 stocks, and no company was much above 1%. Its 0.35% expense ratio is higher than the 0.24% average for similar small-cap funds.

• Over the year to Oct 27, 2026, FLQS returned +13.1%, 9th of 9 among similar funds.
• Its 5-year annualized return was +6.5%.
• In the 2020 COVID crash it fell 41.5% and regained its old high 8 months after the low.
• Its worst full calendar year was 2022 (-16.9%); its best was 2021 (+26.6%).
• The deepest fall in its price history was 42.2% (Sep 4, 2018 to Mar 18, 2020), recovered by Nov 16, 2020.

As of Jun 30, 2026, the fund held 495 securities; the ten largest made up 9.57% of assets.

• Over the three months to Jun 30, 2026, investors withdrew a net $2.4M (creations minus redemptions, per the N-PORT report).
• Monthly total returns reported for that quarter: +7.77%, -0.87%, +7.20%.

FLQS, from Franklin Templeton, tracks the LibertyQ U.S. Small Cap Equity Index. FTSE Russell maintains that index. It starts with the Russell 2000 Index, which holds about 2,000 of the smallest companies in the Russell 3000. It then screens them for four "factors," which are shared traits that help explain returns. Quality looks at measures such as return on equity. Value looks at forward earnings yield, price to book value and dividend yield. Momentum looks at 6- and 12-month price gains, adjusted for risk. Low volatility uses beta, a measure of how much a stock swings compared with the market. The goal is lower risk and better risk-adjusted returns than the Russell 2000 over the long term. As of May 31, 2026, the index held 473 stocks, with company values from $21 million to $16.97 billion.

The index is rebuilt twice a year. At each rebuild, no company can make up more than 1%, and limits keep trading down. Portfolio turnover was 23%. The fund can use futures and swaps to put cash to work. As of June 30, 2026, it held a tiny Russell 2000 futures position and 1.47% cash.

The fund is passive, so it won't turn defensive when markets fall. Its largest holdings as of June 30, 2026 were Alkermes, ESCO Technologies and Moog, at about 1.1% each. The top 10 together made up 9.6% of the fund.

• FLQS charges 0.35% a year, versus an average of 0.24% for the similar funds below (7th of 9, cheapest first).
• Using the prospectus's standard example, $10,000 invested would cost about $36 in the first year and $443 over 10 years (assuming a 5% annual return).

FLQS holds U.S. small-company stocks picked from the Russell 2000 Index for quality, value, momentum and low volatility, so it can add a small-cap tilt next to a broad core fund, but its past drops have been deep.

The fund launched in April 2017, so it has no record from the 2008 crisis. In the 2020 COVID crash it fell 41.5% from February 20 to March 18, 2020, and recovered by November 16. That March 2020 low was also the bottom of its deepest drop: 42.2% from a September 2018 peak. In the 2022 bear market it fell 25.4% and took about 18 months to recover, by December 2023. Its worst calendar year was 2022, with a loss of 16.8%. Anyone drawing cash in a slump like that would be selling shares at low prices.

Income is modest. The yield was 1.51% as of October 27, 2026, paid quarterly. The 0.35% expense ratio is higher than the 0.24% average of similar funds. In the SEC's standard $10,000 example, that comes to $36 in year one and $443 over 10 years. Past results don't predict the future, and a plan should look at the whole portfolio, not one fund.

Matched by holdings overlap from the latest N-PORT reports.