Risk Table - FRANKLIN SMALL CAP ENHANCED ETF
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Risk [Text Block] |
| Principal Risks |
Principal Risks You
could lose money by investing in the Fund. ETF shares are not deposits or obligations of, or guaranteed
or endorsed by, any bank, and are not insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board, or any other agency of the U.S. government. The Fund is subject to the principal risks
noted below, any of which may adversely affect the Fund’s net asset value (NAV), trading price, yield,
total return and ability to meet its investment goal. Unlike many ETFs, the Fund is not an index-based
ETF.
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| Risk Lose Money [Member] |
You
could lose money by investing in the Fund.
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| Market |
Market:
The
market values of securities or other investments owned by the Fund will go up or down, sometimes rapidly
or unpredictably. The market value of a security or other investment may be reduced by market activity
or other results of supply and demand unrelated to the issuer. This is a basic risk associated with all
investments.
When there are more sellers than buyers, prices tend to fall. Likewise, when there are more buyers than
sellers, prices tend to rise. In addition, the value of the Fund’s investments may go up or down due
to general market or other conditions that are not specifically related to a particular issuer, such
as: real or perceived adverse economic changes, including widespread liquidity issues and defaults in
one or more industries; changes in interest, inflation or exchange rates; unexpected natural and man-made
world events, such as diseases or disasters; financial, political or social disruptions, including terrorism
and war; and U.S. trade disputes or other disputes with specific countries that could result in additional
tariffs, trade barriers and/or investment restrictions in certain securities in those countries. Any
of these conditions can adversely affect the economic prospects of many companies, sectors, nations,
regions and the market in general, in ways that cannot necessarily be foreseen. Stock prices tend to go
up and down more dramatically than those of debt securities. A slower-growth or recessionary economic
environment could have an adverse effect on the prices of the various stocks held by the Fund.
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| Multi-Factor Stock Selection Process |
Multi-Factor
Stock Selection Process: There can be no assurance that the multi-factor stock selection process will
enhance performance. Exposure to such investment factors may detract from performance in some market
environments, perhaps for extended periods. There is also no guarantee the Fund will achieve the specific
factor exposures.
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| Quality factor |
Quality factor: Securities that previously
exhibited greater quality characteristics than other securities may not continue to be quality securities.
Many factors can impact a security’s quality and performance, and such factors and their impact may
be difficult to predict.
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| Value factor |
Value factor: Signals from the value
factor like strong price to book value or dividend yields may not be persistent and as such a change
could occur quickly, or such securities could underperform during certain economic cycles or market environments.
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| Sentiment factor |
Sentiment
factor: Securities that previously exhibited greater sentiment (i.e., momentum) characteristics
may not continue to experience positive sentiment, and such a change could occur quickly. Sentiment securities
may experience more volatility than the market as a whole.
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| Alternative factor |
Alternative factor:
Signals from the alternative factor such as high short interest (i.e., “bearish” investor views)
may carry risks such as ambiguous interpretation of investor motives, and the potential for sudden price
spikes due to short squeezes.
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| Conviction factor |
Conviction factor:
Securities with high conviction may nevertheless underperform, perhaps for extended periods. There can
be no guarantee that the investment manager’s
and sub-advisors’ techniques or investment decisions will produce the desired results.
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| Small Capitalization Companies |
Small Capitalization
Companies: Securities issued by small capitalization companies may be more volatile in
price than those of larger companies and may involve substantial risks. Such risks may include greater
sensitivity to economic conditions, less certain growth prospects, lack of depth of management and funds
for growth and development, and limited or less developed product lines and markets. In addition, small
capitalization companies may be particularly affected by interest rate increases, as they may find it
more difficult to borrow money to continue or expand operations, or may have difficulty in repaying any
loans. The markets for securities issued by small capitalization companies also tend to be less liquid
than the markets for securities issued by larger companies.
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| Focus |
Focus: To the extent that
the Fund focuses on particular countries, regions, industries, sectors or types of investments from time
to time, the Fund may be subject to greater risks of adverse developments in such areas of focus than
a fund that invests in a wider variety of countries, regions, industries, sectors or investments.
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| Derivative Instruments |
Derivative
Instruments: The performance of derivative instruments depends largely on the performance
of an underlying instrument, such as a currency, security, interest rate or index, and such instruments
often have risks similar to their underlying instrument, in addition to other risks. Derivative instruments
involve costs and can create economic leverage in the Fund's portfolio which may result in significant
volatility and cause the Fund to participate in losses (as well as gains) in an amount that exceeds the
Fund's initial investment. Other risks include illiquidity, mispricing or improper valuation of the derivative
instrument, and imperfect correlation between the value of the derivative and the underlying instrument
so that the Fund may not realize the intended benefits. When a derivative is used for hedging, the change
in value of the derivative may also not correlate specifically with the currency, security, interest
rate, index or other risk being hedged. With over-the-counter derivatives, there is the risk that the
other party to the transaction will fail to perform.
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| Foreign Securities (non-U.S.) |
Foreign Securities (non-U.S.):
Investing in foreign securities typically involves different risks than investing in U.S. securities,
and includes risks associated with: (i) internal and external political and economic developments –
e.g., the political, economic and social policies and structures of some foreign countries may be less
stable and more volatile than those in the U.S. or some foreign countries may be subject to trading restrictions
or economic sanctions; diplomatic and political developments could affect the economies, industries,
and securities and currency markets of the countries in which the Fund is invested, which can include
rapid and adverse political changes; social instability; regional conflicts; sanctions imposed by the
United States, other nations or other governmental entities, including supranational
entities; terrorism; and war; (ii) trading practices – e.g., government supervision and regulation
of foreign securities and currency markets, trading systems and brokers may be less than in the U.S.;
(iii) availability of information – e.g., foreign issuers may not be subject to the same disclosure,
accounting and financial reporting standards and practices as U.S. issuers; (iv) limited markets –
e.g., the securities of certain foreign issuers may be less liquid (harder to sell) and more volatile;
and (v) currency exchange rate fluctuations and policies – e.g., fluctuations may negatively affect
investments denominated in foreign currencies and any income received or expenses paid by the Fund in
that foreign currency.
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| Management |
Management: The Fund is subject to management risk
because it is an actively managed ETF. The Fund's investment manager applies investment techniques and
risk analyses in making investment decisions for the Fund, but there can be no guarantee that these decisions
will produce the desired results.
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| Quantitative Models |
Quantitative Models: The
quantitative models that may be used by the investment manager as part of the Fund’s portfolio construction
process to evaluate investment opportunities have been tested on historical price data. These models
are based on the assumption that price movements in most markets continue to display similar patterns
as those observed in the past. There is the risk that market behavior will change and that the patterns
upon which the forecasts in the models are based will weaken or disappear, which would reduce the ability
of the models to generate an excess return. Further, as market dynamics shift over time, a previously
highly successful model may become outdated, perhaps without the investment manager recognizing that
fact before substantial losses are incurred. Successful operation of a model is also reliant upon the
information technology systems of the investment manager and its ability to ensure those systems remain
operational and that appropriate disaster recovery procedures are in place. There can be no assurance
that the investment manager will be successful in maintaining effective and operational quantitative
models and the related hardware and software systems.
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| Cybersecurity |
Cybersecurity:
Cybersecurity incidents, both intentional and unintentional, may allow an unauthorized party to gain
access to Fund assets, Fund or customer data (including private shareholder information), or proprietary
information, cause the Fund, the investment manager, authorized participants, or index providers (as
applicable) and listing exchanges, and/or their service providers (including, but not limited to, Fund
accountants, custodians, sub-custodians, transfer agents and financial intermediaries) to suffer data
breaches, data corruption or loss of operational functionality or prevent Fund investors from purchasing,
redeeming shares or receiving distributions. The investment manager has limited ability to prevent or
mitigate cybersecurity incidents affecting third party service providers, and such third party service
providers may have limited indemnification obligations to the Fund or the investment manager. Cybersecurity
incidents may result in financial
losses to the Fund and its shareholders, and substantial costs may be incurred in an effort to prevent
or mitigate future cybersecurity incidents. Issuers of securities in which the Fund invests are also
subject to cybersecurity risks, and the value of these securities could decline if the issuers experience
cybersecurity incidents. Because technology is frequently changing, new ways to carry out cyber attacks
are always developing. Therefore, there is a chance that some risks have not been identified or prepared
for, or that an attack may not be detected, which puts limitations on the Fund's ability to plan for
or respond to a cyber attack. Like other funds and business enterprises, the Fund, the investment manager,
and their service providers are subject to the risk of cyber incidents occurring from time to time.
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| Depositary Receipts |
Depositary
Receipts: Depositary receipts are subject to many of the risks of the underlying security.
For some depositary receipts, the custodian or similar financial institution that holds the issuer's
shares in a trust account is located in the issuer's home country. The Fund could be exposed to the credit
risk of the custodian or financial institution, and in cases where the issuer’s home country does not
have developed financial markets, greater market risk. In addition, the depository institution may not
have physical custody of the underlying securities at all times and may charge fees for various services,
including forwarding dividends and interest and corporate actions. The Fund would be expected to pay
a share of the additional fees, which it would not pay if investing directly in the foreign securities.
The Fund may experience delays in receiving its dividend and interest payments or exercising rights as
a shareholder. There may be an increased possibility of untimely responses to certain corporate actions
of the issuer in an unsponsored depositary receipt program. Accordingly, there may be less information
available regarding issuers of securities underlying unsponsored programs and there may not be a correlation
between this information and the market value of the depositary receipts.
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| Market Trading |
Market
Trading: The Fund faces numerous market trading risks, including the potential lack of
an active market for Fund shares, losses from trading in secondary markets, periods of high volatility
and disruption in the creation/redemption process of the Fund. Any of these factors, among others, may
lead to the Fund’s shares trading at a premium or discount to NAV. Thus, you may pay more (or less)
than NAV when you buy shares of the Fund in the secondary market, and you may receive less (or more)
than NAV when you sell those shares in the secondary market. The investment manager cannot predict whether
shares will trade above (premium), below (discount) or at NAV. To the extent that the
underlying securities held by the Fund trade on an exchange that is closed when the securities exchange
on which the Fund shares list and trade is open, there may be market uncertainty about the stale security
pricing (i.e., the
last quote from its closed foreign market) resulting in premiums or discounts to NAV that may be greater
than those experienced by other ETFs.
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| Authorized Participant Concentration |
Authorized Participant Concentration:
Only an Authorized Participant may engage in creation or redemption transactions directly with the Fund.
"Authorized Participants" are broker-dealers that are permitted to create and redeem shares directly
with the Fund and who have entered into agreements with the Fund’s distributor. The Fund has a limited
number of institutions that act as Authorized Participants. To the extent that these institutions exit
the business or are unable to proceed with creation and/or redemption orders with respect to the Fund
and no other Authorized Participant is able to step forward to create or redeem Creation Units (as defined
below), Fund shares may trade at a discount to NAV and possibly face trading halts and/or delisting.
This risk may be more pronounced in volatile markets, potentially where there are significant redemptions
in ETFs generally.
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| New Fund |
New Fund: The Fund is newly or recently established
and has no performance history as of the date of this Prospectus. There can be no assurance that the
Fund will grow to or maintain an economically viable size, which could result in the Fund being liquidated
at any time without shareholder approval and at a time that may not be favorable for all shareholders.
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| Large Shareholder |
Large
Shareholder: Certain large shareholders, including other funds or accounts advised by the
investment manager, sub-advisor or an affiliate of the investment manager or sub-advisor, may from time
to time own a substantial amount of the Fund’s shares. In addition, a third-party investor, the investment
manager, sub-advisor or an affiliate of the investment manager or sub-advisor, an authorized participant,
a lead market maker, or another entity may invest in the Fund and hold its investment for a limited period
of time solely to facilitate commencement of the Fund or to facilitate the Fund’s achieving a specified
size or scale. There can be no assurance that any large shareholder would not redeem its investment,
that the size of the Fund would be maintained at such levels or that the Fund would continue to meet
applicable listing requirements. Redemptions by large shareholders could have a significant negative
impact on the Fund. In addition, transactions by large shareholders may account for a large percentage
of the trading volume on the listing exchange and may, therefore, have a material upward or downward
effect on the market price of the shares.
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