Risk Table - Franklin Short Duration U.S. Government ETF
|
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.
|
| Risk Lose Money [Member] |
You could lose money by investing in the Fund.
|
| Interest Rate |
Interest Rate: When interest rates
rise, debt security prices generally fall. The opposite is also generally true: debt security prices
rise when interest rates fall. Interest rate changes are influenced by a number of factors, including
government policy, monetary policy, inflation expectations, perceptions of risk, and supply of and demand
for bonds. In general, securities with longer maturities or durations are more sensitive to interest
rate changes.
|
| Mortgage Securities |
Mortgage Securities: Mortgage securities differ from conventional
debt securities because principal is paid back periodically over the life of the security rather than
at maturity. The Fund may receive unscheduled payments of principal due to voluntary
prepayments, refinancings or foreclosures on the underlying mortgage loans. Because of prepayments, mortgage
securities may be less effective than some other types of debt securities as a means of "locking in"
long-term interest rates and may have less potential for capital appreciation during periods of falling
interest rates. A reduction in the anticipated rate of principal prepayments, especially during periods
of rising interest rates, may increase or extend the effective maturity and duration of mortgage securities,
making them more sensitive to interest rate changes, subject to greater price volatility, and more susceptible
than some other debt securities to a decline in market value when interest rates rise. Mortgage securities purchased
on a delayed delivery or forward commitment basis through the to-be-announced market (TBA) are subject
to the risk that the actual securities received by the Fund may be less favorable than anticipated, or
that a counterparty will fail to deliver the security. Entering into a when-issued, delayed delivery
or TBA transaction may be viewed as a form of leverage and will result in associated risks for the Fund.
Sales of debt securities on a when-issued or delayed delivery basis are also subject to the risk that
the Fund is unable to purchase securities for delivery at the settlement date with the characteristics
agreed upon at the time of the transaction, which may subject the Fund to market losses or other penalties.
|
| Prepayment |
Prepayment:
Prepayment risk occurs when a debt security can be repaid in whole or in part prior to the security's
maturity and the Fund must reinvest the proceeds it receives, during periods of declining interest rates,
in securities that pay a lower rate of interest. Also, if a security has been purchased at a premium,
the value of the premium would be lost in the event of prepayment. Prepayments generally increase when
interest rates fall.
|
| Variable Rate Securities |
Variable Rate Securities: Because changes in
interest rates on variable rate securities (including floating rate securities) may lag behind changes
in market rates, the value of such securities may decline during periods of rising interest rates until
their interest rates reset to market rates. During periods of declining interest rates, because the interest
rates on variable rate securities generally reset downward, their market value is unlikely to rise to
the same extent as the value of comparable fixed rate securities.
|
| Income |
Income:
The Fund's distributions to shareholders may decline when prevailing interest rates fall, when the Fund
experiences defaults on debt securities it holds or when the Fund realizes a loss upon the sale of a
debt security.
|
| Extension |
Extension: Some debt securities, particularly mortgage-backed
securities, are subject to the risk that the debt security’s effective maturity is extended because
calls or prepayments are less or slower than anticipated, particularly when interest rates
rise. The market value of such security may then decline and become more interest rate sensitive.
|
| 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.
|
| Mortgage Dollar Rolls |
Mortgage
Dollar Rolls: In a mortgage dollar roll, the Fund takes the risk that: the market price of
the mortgage-backed securities will drop below their future repurchase price; the securities that it
repurchases at a later date will have less favorable market characteristics; the other party to the agreement
will not be able to perform; the roll adds leverage to the Fund's portfolio; and, it increases the Fund's
sensitivity to interest rate changes. In addition, investment in mortgage dollar rolls may increase the
portfolio turnover rate for the Fund.
|
| Inflation-Indexed Securities |
Inflation-Indexed Securities:
Inflation-indexed
securities have a tendency to react to changes in real interest rates. Real interest rates represent
nominal (stated) interest rates lowered by the anticipated effect of inflation. In general, the price
of an inflation-indexed security decreases when real interest rates increase, and increases when real
interest rates decrease. Interest payments on inflation-indexed securities will fluctuate as the principal
and/or interest is adjusted for inflation and can be unpredictable. Any increase in the principal amount
of an inflation-protected debt security will be considered taxable ordinary income, even though investors,
such as the Fund, do not receive their principal until maturity.
|
| Portfolio Turnover |
Portfolio
Turnover: Active and frequent trading may increase a shareholder’s tax liability and the
Fund’s transaction costs, which could detract from Fund performance.
|
| Derivative Instruments |
Derivative
Instruments: The performance of derivative instruments depends largely on the performance
of an underlying instrument, such as a 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 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.
|
| Credit |
Credit:
An issuer of debt securities may fail to make interest payments or repay principal when due, in whole
or in part. Changes in an issuer's financial strength or in a security's or government's credit rating
may affect a security's value. While securities issued by Ginnie Mae are backed by the full faith and
credit of the U.S. government, not all securities of the various U.S. government agencies are, including
those of Fannie Mae and Freddie Mac. Accordingly, securities issued by Fannie Mae and Freddie Mac may
involve a risk of non-payment of principal and interest. U.S. government guarantees of timely repayment
of principal and interest on government securities do not apply to the market prices and yields of the
securities or to the NAV, trading price or performance of the Fund. Irrespective of such U.S. government
guarantees, the market prices and yields of the securities and, consequently, the NAV, trading price
and performance of the Fund, will vary with changes in interest rates and other market conditions. Any
downgrade of the credit rating of the securities issued by the U.S. Government may result in a downgrade
of securities issued by its agencies or instrumentalities, including government-sponsored entities. The
Fund may incur losses on debt securities that are inaccurately perceived to present a different amount
of credit risk by the market, the investment manager or the rating agencies than such securities actually
do.
|
| 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.
|
| 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.
|
| 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.
|
| 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.
|
| Cash Transactions |
Cash
Transactions: Unlike certain ETFs, the Fund expects to generally effect its creations and
redemptions entirely for cash, rather than for in-kind securities. Therefore, it may be required to sell
portfolio securities and subsequently recognize gains
on such sales that the Fund might not have recognized if it were to distribute portfolio securities in-kind.
As such, investments in Fund shares may be less tax-efficient than an investment in an ETF that distributes
portfolio securities entirely in-kind.
|
| Large Shareholder |
Large Shareholder:
Certain large shareholders, including other funds or accounts advised by the investment manager or an
affiliate of the investment manager, may from time to time own a substantial amount of the Fund’s shares.
In addition, a third-party investor, the investment manager or an affiliate of the investment manager,
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.
|
|