The folks at a $1.53-trillion-AUM*, publicly traded asset manager are preparing to transform a 10-fund, $3.51898-billion-AUM suite of muni bond mutual funds into ETFs.

Yesterday, Patrick O'Connor, head of global ETFs at San Mateo, California-based Franklin Templeton [profile], and Ben Barber, director of fixed income for municipal bonds, revealed the planned conversion. All the transforming funds are Putnam funds, and news of the pending transformations comes about 16 months after Franklin acquired Putnam.

The converting funds are:

the $684.12-million-AUM Putnam California Tax Exempt Income Fund;

the $232.38-million-AUM Putnam Massachusetts Tax Exempt Income Fund;

the $182.64-million-AUM Putnam Minnesota Tax Exempt Income Fund;

the $146.66-million-AUM Putnam New Jersey Tax Exempt Income Fund;

the $717.47-million-AUM Putnam New York Tax Exempt Income Fund;

the $81.39-million-AUM Putnam Ohio Tax Exempt Income Fund;

the $97.06-million-AUM Putnam Pennsylvania Tax Exempt Income Fund;

the $162.59-million-AUM Putnam Short-Term Municipal Income Fund;

the $555.26-million-AUM Putnam Tax-Exempt Income Fund; and

the $659.41-million-AUM Putnam Tax-Free High Yield Fund.

The Franklin team expects to complete the 10 conversions between Q4 2025 and Q1 2026. The move would boost Franklin's U.S. ETF platform to more than 80 ETFs and about $36 billion in AUM (on a pro forma basis).

O'Connor puts the planned transformations in the context of "investor demand for high-quality municipal bond strategies delivered in a more cost-efficient, flexible, and transparent structure." Barber adds that Franklin is "at the forefront of bringing municipal bond strategies to market at scale in an ETF wrapper."

"This is a meaningful step in making tax-free income solutions more accessible for all investors and reinforces our commitment to innovation and leadership in the municipal bond space," Barber states.

Franklin Advisers, Inc. serves as investment advisor to all 10 converting funds, and Putnam Investment Management, LLC serves as a subadvisor to the funds. Franklin Templeton Investment Managemend Limited (FTIML) also serves as a subadvisor to the California, New York, short-term, tax-exempt income, and tax-free high yield funds. And Putnam Investments Limited also serves as a subadvisor to the Massachusetts, Minnesota, New Jersey, Ohio, and Pennsylvania funds.

The California fund's inception date was April 29, 1983, and it comes in four flavors:

A shares (PCTEX), with an expense ratio of 88 basis points;

C shares (PCTCX), with an expense ratio of 163bps;

R6 shares (PCLGX), with an expense ratio of 63bps; and

Y shares (PCIYX), with an expense ratio of 63bps.

The Massachusetts fund's inception date was October 23, 1989, and it also comes in four flavors:

A shares (PXMAX), with an expense ratio of 83bps;

C shares (PMMCX), with an expense ratio of 158bps;

R6 shares (PMATX), with an expense ratio of 56bps; and

Y shares (PMAYTX), with an expense ratio of 58bps.

The Minnesota fund's inception date was also October 23, 1989, and it also comes in four flavors:

A shares (PXMNX), with an expense ratio of 88bps;

C shares (PMOCX), with an expense ratio of 163bps;

R6 shares (PMVTX), with an expense ratio of 58bps; and

Y shares (PMNYX), with an expense ratio of 63bps.

The New Jersey fund's inception date was February 20, 1990, and it also comes in four flavors:

A shares (PTNJX), with an expense ratio of 84bps;

C shares (PNJCX), with an expense ratio of 159bps;

R6 shares (PNJRX), with an expense ratio of 58bps; and

Y shares (PNJYX), with an expense ratio of 59bps.

The New York fund's inception date was September 2, 1983, and it also comes in four flavors:

A shares (PTEIX), with an expense ratio of 79bps;

C shares (PNNCX), with an expense ratio of 154bps;

R6 shares (PNYRX), with an expense ratio of 53bps; and

Y shares (PNYYX), with an expense ratio of 54bps.

The Ohio fund's inceptiond date was also October 23, 1989, and it also comes in four flavors:

A shares (PXOHX), with an expense ratio of 91bps;

C shares (POOCX), with an expense ratio of 166bps;

R6 shares (POHRX), with an expense ratio of 63bps; and

Y shares (POTYX), with an expense ratio of 66bps.

The Pennsylvania fund's inception date was July 21, 1989, and it also comes in four flavors:

A shares (PTEPX), with an expense ratio of 89bps;

C shares, with an expense ratio of 164bps;

R6 shares (PPTRX), with an expense ratio of 61bps; and

Y shares (PPTYX), with an expense ratio of 64bps.

The short-term fund's inception date was March 18, 2013, and it also comes in four flavors:

A shares (PSMEX), with an expense ratio of 61bps;

C shares (PSMTX), with an expense ratio of 136bps;

R6 shares (PYSTX), with an expense ratio of 33bps; and

Y shares (PSMYX), with an expense ratio of 36bps.

The tax-exempt income fund's inception date was December 31, 1976, and it also comes in four flavors:

A shares (PTAEX), with an expense ratio of 92bps;

C shares (PTECX), with an expense ratio of 167 bps;

R6 shares (PEXTX), with an expense ratio of 64bps; and

Y shares (PTEYX), with an expense ratio of 67bps.

The tax-free high yield fund's inception date was September 9, 1985, and it also comes in four flavors:

A shares (PTHAX), with an expense ratio of 96bps;

C shares (PTCCX), with an expense ratio of 171bps;

R6 shares (PTFRX), with an expense ratio of 69bps; and

Y shares (PTFYX), with an expense ratio of 71bps.

All the funds' A and C shares come with a maximum deferred load of 100bps. The short-term fund's A shares also come with a maximum up-front load of 225bps. And the other nine funds' A shares come with a maximum up-front load of 400bps.

Expense ratios for the planned ETFs have not yet been publicly revealed.

The seven state funds each use the same six-person portfolio manager team, which includes:

John Bonelli (who has PMed the funds since 2024);

Michael Conn (who has also PMed the funds since last year);

Paul Drury (who has PMed the funds since 2002);

Garrett Hamilton (who has PMed the funds since 2016);

Christopher Sperry (who has PMed the funds since 2024); and

John Wiley (who has PMed the funds since 2024).

The three non-state funds each use the same six-person PM team, which includes:

Benjamin Barber (who has PMed the funds since 2024);

James Conn (who has PMed the funds since 2024);

Francisco Rivera (who has PMed the funds since 2024);

Daniel Workman (who has PMed the funds since 2024);

Drury; and

Hamilton.

Drury is expected to retire on May 30.

The 10 converting funds' other service providers include:

Franklin Distributors, LLC as distributor and principal underwriter;

Goldman Sachs Bank USA as securities lending agent;

JPMorgan Chase Bank, N.A. as custodian and sub-administrator;

PricewaterhouseCoopers LLP as independent accounting firm;

Putnam Investor Services as investor servicing agent (which includes serving as dividend disbursing agent and transfer agent); and

Ropes & Gray LLP as counsel.

*All AUM figures in this article are as of April 30, 2025. 

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