First Trust, the money management firm behind the popular
Internet-related fund, âFDN,â filed paperwork with U.S.
regulators to market two small-cap equities ETFs that use its
AlphaDex indexing methodologyâone focused on developed countries,
the other on emerging markets.
The First Trust Developed Markets ex-U.S. Small Cap AlphaDex
Fund and the First Trust Emerging Markets Small Cap AlphaDex Fund
will each have annual expense ratios of 0.80 percent. Wheaton,
Ill.-based First Trust didnât disclose tickers in the filing.
First Trustâs new funds will go head-to-head with a growing
roster of small-cap-focused funds already being marketed by
big-name ETF firms such as San Francisco-based iShares, low-cost
provider Charles Schwab, and State Street Global Advisors, the
sponsor behind the SPDR funds.
Investors have increasingly embraced strategies that hone in on
the small-cap equity segment for the higher-risk/higher-reward
profile of those stocks. Small-cap equities are also generally
thought to reflect domestic consumption, as opposed to larger
companies, that are more directly linked to the global economy.
Small-cap ETFs focused on emerging markets are still relatively
young, though they have begun to get traction, particularly since
the global economic crisis began in earnest in 2008.
For example, SSgAâs SPDR Emerging Markets Small Cap ETF
(NYSEArca:EWX) now has gathered about $736 million since its 2008
launch. The iShares newcomer to the space, the iShares Emerging
Markets Small Cap ETF (NYSEArca:EEMS), has gathered $32 million
since it came to market five months ago.
iShares also has a pair of funds that canvass the
developed-world small-cap equity market. Those include the $1.2
billion iShares MSCI EAFE Small Cap ETF (NYSEArca:SCZ), which
focuses on developed economies outside the United States. It also
markets the much smaller iShares FTSE Developed Small Cap ex-North
America ETF (NYSEArca:IFSM), which has gathered only $30 million
since its 2007 launch.
Another competing fund in the space is the two-year-old Schwab
International Small-Cap Equity (NYSEArca:SCHC), which has attracted
nearly $138 million.
But First Trustâs planned funds add a quasi-active wrinkle to
the otherwise-purely beta competing funds.
First Trustâs AlphaDex quantitative indexing methodology seeks
to generate extra return relative to traditional pure-beta
market-capitalization-weighted indexes by employing an active
security selection process. The company first rolled out its
AlphaDex methodology in 2007.
First Trust already offers 30 AlphaDex ETFs tapping into
everything from country-specific portfolios, to sector, to size and
style methodologies, including a U.S.-focused AlphaDex small-cap
ETF, âFYX,â which has gathered $125 million since it came to
market in May 2007.
Apart from its AlphaDex funds, the company is also known for its
niche ETF strategies, notably its $480 million First Trust Dow
Jones Internet ETF (NYSEArca:FDN).
Don't forget to check IndexUniverse.com's ETF Data
2012 IndexUniverse LLC
. All Rights Reserved.