Franklin Income Focus ETF

INCM

Market cap $842M

Franklin Income Focus ETF offers a 5% yield from a diversified portfolio of debt, equities, and derivative income strategies. Unlike many high-yield ETFs, INCM doesn't show capital or income decay for now, but its track record is too short for long-term assessment. Compared to other income-focused ETFs such as HYDB, VRP, and CLOI, INCM ranks lower in yield, total return, and/or risk-adjusted performance.

The Franklin Income Focus ETF remains a Buy for conservative investors seeking high income and moderate equity exposure, with a consistent 5% yield and low volatility. The fund's allocation has shifted toward healthcare and technology, while maintaining a strong value and high-yield corporate bond focus. INCM's performance ranks in the top 10% of conservatively allocated funds, with total returns closely tracking the S&P 500 over the last 12 months when dividends are included.

INCM offers a dynamic, actively managed 60/40 portfolio but has underperformed the passive AOR ETF in total return over the past year. Despite lower volatility and a marginally higher Sharpe ratio, INCM's higher expense ratio is not justified by its performance. The fund has shifted its allocation, reducing fixed income exposure and overweighting high yield credit and healthcare equities.

Franklin Income Focus ETF offers a 5.25% yield from a diversified portfolio of debt and equity securities. There is no red flag in INCM's risk profile and past performance, but its short track record is still unconvincing compared to some income ETFs. In particular, a junk bond ETF and a preferred ETF are more compelling based on yield and total return, while a CLO ETF looks a better choice for risk-averse investors.

On the latest episode of ETF 360, VettaFi's Kristen Chang spoke to Franklin Income Investors' SVP and Portfolio Manager Todd Brighton. The two discussed the Franklin Income Focus ETF (INCM) and the Franklin Income Equity Focus ETF (INCE).

Franklin Income Focus ETF offers diversified income through a multi-asset approach, blending stocks, bonds, and preferreds for a 4.93% 30-day SEC yield. INCM's active management allows for flexible asset allocation, potentially outperforming in volatile markets, though it comes with a higher expense ratio of 0.38%. The fund's sector allocation includes substantial weightings in Tech, Financials, and Health Care, providing exposure to mature companies with steady dividends.

Franklin Income Focus ETF is a relatively new blended ETF offering from Franklin Templeton, which launched in June of last year. For investors who value a higher level of income but do not want to ignore opportunities for capital appreciation, INCM appears to provide a unique way to play the market. INCM's potential value lies in potential downside protection during market corrections as well as its flexibility to modify its investment allocations as market conditions change.

Franklin Income Focus ETF offers a flexible and active 60/40 portfolio allocation, with a blend benchmark of the S&P 500 Index and the Bloomberg US Aggregate Index. INCM has a composition that reflects a realistic allocation for retail investors, with a focus on fixed-income and high-yield bonds. The 'Fixed Income' bucket currently sits at 60.8%. On the equity side, the highest allocation is to information technology, followed by financials and consumer staples. The trailing P/E for the equities sleeve is 17x.

The winter holiday season is here, and I wanted to join in the festivities. Recently, advisors have become more comfortable turning to active ETFs to help them and their clients navigate the uncertain market environment.