On Feb 5, 2010, First Trust announced that it is joining the long line of issuers who are planning to issue new actively-managed ETFs. First Trust currently provides a wide-range of ETF options, closed-end funds, ETNs, unit trusts and more. This will be its first foray into the Active ETF space.
First Trust has filed for two new Active ETFs, the first of which is the First Trust Developed International Markets AlphaDEX Fund and the second is called the First Trust Emerging Markets AlphaDEX Fund. Both of these products utilize the fund’s AlphaDEX methodology which involves selecting the highest ranking securities according to a proprietary quantitative model which are then separated into 5 groups, with higher ranked securities receiving a larger weight in the overall portfolio. The funds are rebalanced on a quarterly basis.
The difference between the two funds comes in when identifying the universe of investable companies. The Developed International Markets fund invests in mid-large cap companies in non-US developed markets, which include Japan, Hong Kong, Western Europe, Canada, New Zealand and Australia. In comparison, the Emerging Markets fund invests mid-large cap companies in emerging countries that “are in the initial stages of their industrialization cycles and have lower market liquidity compared to developed market peers”. Also, while the Developed Markets fund starts off with an initial universe of 300 securities, the Emerging Markets fund uses a narrower universe of 150 highest ranking securities.
Both portfolios are managed by a committee which is chaired by Daniel J. Lindquist, an SVP of First Trust and also includes other top brass at the firm.
The expenses and tickers of these new Active ETFs have yet to be announced.
Disclosure: No positions in Active ETFs.
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