ETFs for Volatile Markets: Franklin Templeton’s Strategy
As market uncertainty grows, Franklin Templeton highlights ETF strategies that can offer income, diversification, and resilience.
Making Sense of Market Volatility Through Smarter ETF Positioning
With rising geopolitical risks, shifting interest rate expectations, and ongoing concerns about equity concentration, 2025 has proven to be anything but predictable. For many investors and advisors, the path forward requires a blend of caution, adaptability, and well-targeted ETF tools.
Franklin Templeton’s Canadian Head of ETF Product Strategy, Alex Lee, has spent the year meeting advisors across the country. A clear theme has emerged from those conversations: market volatility is now a constant, not an exception.
This environment has prompted investors to reassess their traditional asset allocations. Rather than chasing returns, many are focused on building resilience, seeking out ETFs that can help navigate uncertainty without sacrificing long-term objectives.
A Shift in ETF Flows Reflects Defensive Positioning
ETF inflows in 2025 have revealed a more balanced appetite across asset classes. While equities remain popular, fixed income has reasserted itself in portfolios, particularly through targeted exposures such as ultra short-term bonds and investment-grade credit.
On the equity side, international and global ETFs have seen a resurgence. Much of this is driven by concerns over the dominance and valuation levels of U.S. mega-cap stocks. With performance improving in Europe, parts of Asia, and Latin America, and relative valuations far more attractive, global diversification has become a key lever in managing portfolio risk. With a 0.09% management fee¹, FLUR delivers institutional-grade passive exposure to developed markets at very low cost.
Smart Beta, Smarter Defense: The Role of FLVI
Among the ETF strategies gaining traction is FLVI, Franklin Templeton’s International Low Volatility High Dividend Index ETF. Built on a multifactor smart beta approach, FLVI combines income generation with volatility management — two attributes in high demand today.
Unlike traditional high dividend funds, FLVI incorporates both price and earnings volatility screens, helping it avoid companies that may look attractive on yield but carry elevated risk under the surface. Its design aims to provide more stable income streams and lower drawdowns, especially during market dislocations.
In a year where reliability has become more important than pure performance chasing, FLVI offers a compelling alternative to broad international equity exposures.
Fixed Income Stability with Ultra-Short Bonds
In fixed income, Franklin Templeton’s FHIS – ETF series of Franklin Canadian Ultra Short Term Bond Fund, continues to stand out as a practical volatility buffer. Traditional core bond exposures have struggled to deliver positive returns, with the Canadian bond universe barely outpacing cash year-to-date². Volatility in both rates and credit has added to investor unease.
Ultra-short strategies like FHIS offer a lower-duration profile while still providing income, a valuable combination in a market where interest rate direction remains uncertain. More advisors are beginning to view ultra-short ETFs not just as cash alternatives but as strategic portfolio anchors that can smooth returns and enhance liquidity.
Intentional Investing for an Unpredictable Market
The message from Franklin Templeton is clear: in an age of persistent volatility, success hinges on being deliberate about where to allocate risk, how to generate income, and when to adjust course. ETF strategies that emphasize balance, resilience, and smart construction are gaining relevance, not just as stopgaps, but as core components of the modern diversified portfolio.
¹ As of June 30, 2025
² As of June 30, 2025
Important Legal Information
This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell, or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. The views expressed are those of the investment manager, and the comments, opinions, and analyses are rendered as at publication date and may change without notice. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region, or market.
Commissions, trailing commissions, management fees, brokerage fees, and expenses may be associated with investments in mutual funds and ETFs. Please read the prospectus and fund fact/ETF facts document before investing. Mutual funds and ETFs are not guaranteed. Their values change frequently. Past performance may not be repeated.
Franklin Templeton Canada is a business name used by Franklin Templeton Investments Corp.
