First Trust has seen immense success with its U.S.-based product - Dorsey Wright Focus 5 ETF (FV) - that hit the market this March. Within just five months of its launch, the fund has amassed more than $350 million in assets along with average trading volume of 250,000 shares a day.
Thus, to replicate the success of this relatively fresh-themed ETF hailing from the large-cap blend equities space, the issuer took a step forward and launched the global version of FV (read: First Trust Launches Dorsey Wright Focus 5 ETF
This newcomer -- First Trust Dorsey Wright International Focus 5 ETF - hit the market on July 23 and trades with the ticker symbol 'IFV'.IFV in Focus
Like FV, the new ETF is also an ETF of ETFs. It looks to have an enhanced exposure by following the Dorsey Wright International Focus Five Index. The index is designed to indentify the five First Trust international ETFs that are expected to have the maximum chance of outperforming the other ETFs in the selection universe, per the issuer
The new portfolio is based on momentum strategies as measured by Dorsey Wright's definition of relative strength characteristics. DWA essentially eliminates the underlying ETF's volume, intraday net asset value (NAV) or bid/ask spread and closely monitors how their prices are performing versus other ETFs within their respective space. ETFs with high relative strength scores (strong momentum) are given higher weights in the index while those with low relative strength scores (weak momentum) are underweighted.
First Trust Switzerland AlphaDEX Fund ( FSZ
), First Trust Canada AlphaDEX Fund ( FCAN
), First Trust Germany AlphaDEX Fund ( FGM)
, First Trust United Kingdom AlphaDEX Fund ( FKU
) and First Trust Emerging Markets Small Cap AlphaDEX Fund ( FEMS
) are the country ETFs in IFV right now.
The five ETFs are almost weighed equally with FSZ taking the top spot with about 25% of exposure followed by FCAN and FGM each having about 19% of the fund's share. The fund charges an expense ratio of 1.10%. Component ETFs will also be substituted as soon as these start underperforming on relative strength ranking.How could it fit in a portfolio?
This ETF could be appropriate for investors seeking a momentum play in the international arena. Three-fifth share of the fund is invested in Europe which is presently seeing extremely low levels of interest rates. In fact, the ECB introduced a negative deposit rate in June, and was the first major central bank to resort to such a step (read: Negative Interest Rates Put These European ETFs in Focus
This should bolster activities in the troubled Euro zone. Also, the newly launched ETF centers around (right now) the better performing European economies like Germany, Switzerland and U.K. The stock markets of these nations should behave aggressively favored by an easy money policy and measured economic growth prospect. In such a scenario, possessing IFV in one's portfolio might prove a wise decision (read: 3 European ETFs to Buy After ECB Action
operates in the global equities ETF space which is quite crowded and ruled by the largest and actively traded fund Vanguard FTSE All-World ex US Index Fund
) having an asset base of about $13 billion. However, most of the products in the space focus on stocks either from single country or multiple countries. Hardly any of the products are made of other ETFs (read: Cambria Launches New Global Value ETF
Though the concept of ETFs made of ETFs is not new in the industry, the options are still very few. So, from that context, the newly launched product should see immense success ahead if it is able to differentiate itself.
As far as momentum ETFs are concerned, there should not be any meaningful competition for IFV. We believe that IFV's strategy is exclusive and should easily help in building up a solid fan base among investors.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free reportFT-DORSEY WFFF (FV): ETF Research ReportsFT-DW FOCS5 INT (IFV): ETF Research ReportsVANGD-FTSE AWLD (VEU): ETF Research ReportsTo read this article on Zacks.com click here.Zacks Investment ResearchWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report