Analyzing First Trust’s Best Performing ETFs of 2014

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First Trust ranks as the eighth largest ETF Sponsor with $25.2 billion of assets under management according to data as of May 22, 2014 from ETF.com. The firm has created a robust mix of ETFs covering everything from investment styles and sectors to individual countries and themes. Let’s take a closer look at the year to date best performing ETFs from First Trust and the investment insights those figures may provide.

According to ETF Database, First Trust has 86 U.S. listed ETFs. Here are the top ten best performing First Trust ETFs year to date.

10 BEST PERFORMING FIRST TRUST ETFs IN 2014

QUICK OBSERVATIONS

Notice six of the top 10 performers have returned double digits in 2014 as compared to the S&P 500 with about a 5% gain. Three of the funds are global focused ETFs (FAN, FTGC and FFR). Although asset size of the ETFs are not visible in the above graphic, the top 10 funds assets under management range from $1.1 billion (FBT) to just over $1.6 million in assets (FAUS). Finally if REITs are included, 7 of the 10 top performers are sector-oriented funds.

REIT FOCUS PAYS OFF

REIT ETFs have been hot this year and are a subject I covered in a previous NASDAQ column. First Trust offers both a domestic REIT (FRI) and a global version (FFR). This approach is a bit unusual as the REIT ETF space is not exactly saturated with choices. The two offering strategy has served the firm well in a year that REITs have both performed well and have been relatively strong asset gatherers. Here’s a quick chart showing year to date performance of FRI, FFR and the S&P 500 ETF (SPY).

DOWN UNDER

Australia has been a growth market in 2014 and First Trust offers an AlphaDEX branded fund to cover that market with FAUS. Even though FAUS is ranked in the top 10 of First Trust performers this year, it holds just $1.6 million in assets making it one of the firm’s smallest ETFs. Why is this? In short, performance has been an issue. The fund debuted in February of 2012 and has been underperforming EWA, the iShares MSCI Australia ETF. Although FAUS’s 8.95% gain in 2014 leads EWA’s 8.66% increase, the long-term comparison chart from StockCharts.com points to FAUS’s recent outperformance being more of an exception.

ENERGY POWER PLAY

Energy related offerings are key players this year for First Trust’s performance leaders. Consider these ETFs targeting wind, natural gas and energy infrastructure companies respectively.

  • FAN (First Trust ISE Global Wind Energy Index Fund)
  • FCG (First Trust ISE Revere Natural Gas Index Fund)
  • EMLP (First Trust North American Energy Infrastructure Fund)

The worst performer in this trio has still gained a healthy 8.8% year to date. It’s interesting to note all three of these energy related ETFs have outperformed the First Trust Energy AlphaDEX Fund (FXN). FXN has returned a healthy 8.2% year to date.

ALPHADEX?

Speaking of AlphaDEX offerings at First Trust, it is interesting to note that just one of the 10 best performing First Trust ETFs is an AlphaDEX ETF. This is a bit odd because the AlphaDEX suite of style, sector and country specific ETFs is the most cohesive suite of ETFs at First Trust. These funds are quantitatively driven and are designed with outperformance in mind. A quick analysis shows that AlphaDEX ETFs make up seven of the 10 largest First Trust ETFs in terms of assets. So why are AlphaDEX ETFs not dominating the top 10 performers this year?

Likely this dynamic has more to do with the unique veins of opportunity being found in market segments this year versus a lack of performance from the AlphaDEX funds. For example there isn’t a REIT or Biotech AlphaDEX fund but three First Trust ETFs with other branding focus on those areas and made the Top 10. Additionally while there is an Energy AlphaDEX (FXN) with strong performance, non AlphaDEX First Trust offerings cover top performing energy subsectors such as wind, natural gas and energy infrastructure spaces. My conclusion is simply that several (and quite often smaller) market segments not served by AlphaDEX have led to more opportunity for appreciation in markets this year.

First Trust’s ETF lineup has produced a variety of funds with market beating returns this year. ETFs that harness opportunities in the energy and the REIT market segments have especially contributed to the firm’s top performers list. Finally, while many may only view First Trust as the home of AlphaDEX ETFs, it is clear there a lot of other opportunities for investors to consider in the firm’s burgeoning ETF lineup.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , ETFs , Investing Ideas , US Markets


Christian Magoon

Christian Magoon

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