ETF Education Report: Franklin Sustainable International Equity ETF (MCSE)

What this ETF is trying to do

The Franklin Sustainable International Equity ETF (ticker: MCSE) is an exchange-traded fund that focuses on international companies. Based on its top holdings, the fund includes large global businesses like Taiwan Semiconductor Manufacturing Co Ltd, ASML Holding NV, and Ferrari NV. This list is a partial view of the fund's holdings, which includes 32 total companies.

What the numbers show

When looking at an ETF, it is important to understand two different types of returns: price return and total return. Price return only tracks how the share price moves. Total return includes both the price movement and any cash distributions paid out to investors.

Here is how MCSE has performed:

• Year-to-Date (YTD): The YTD price return is approximately 1.12%. For this ETF, the YTD total return is also 1.12%.

• One Year: The one-year price return was approximately -4.57%. The one-year total return was approximately -0.94%.

• Three Year: The three-year price return was approximately 9.12%, while the three-year total return was higher at approximately 14.63%.

To give you an idea of the price change, the current price is $13.83. The estimated price from roughly one year ago was approximately $14.49.

Income and distribution explanation

Some investors look for "yield," which is the cash an ETF pays out. MCSE has a distribution yield of approximately 3.74%. This means the fund paid out trailing distributions of about $0.52 per share.

It is important to remember that a distribution yield is not the same as total return. While distributions provide cash, they do not guarantee that your original investment will stay the same value. Also, this fund's distributions are described as "irregular" or "less frequent."

NAV erosion explanation

"NAV erosion" refers to a decline in the Net Asset Value (the actual value of the assets held by the fund). While a falling share price can sometimes look like erosion, they are not always the same thing.

For MCSE, the erosion-risk score is 94, which is labeled as "Stable / sideways." The erosion severity is rated as "good," and there is no severe erosion-risk flag present.

Pros

• The fund has shown a positive total return over the last three years.

• The erosion-risk measurements suggest the fund is currently stable.

Cons

• The one-year price return has been negative.

• Distributions are irregular and do not happen on a set schedule.

Beginner takeaway

When studying MCSE, notice the difference between price return and total return. For example, over three years, the total return was higher than the price return because it includes the value of distributions. Always look at both numbers to see the full picture of how an ETF has performed.