First Trust Active Factor Mid Cap ETF (AFMC)

First Trust Active Factor Mid Cap ETF (FNMC)

Profile:

The First Trust Active Factor Mid Cap ETF (FNMC) is an actively managed exchange-traded fund that seeks to outperform the Russell Midcap Index by employing a quantitative multi-factor stock selection process. Its focus is on mid-sized companies in the U.S., primarily targeting the consumer discretionary, industrials, and healthcare sectors. FNMC employs a combination of fundamental factors, including value, size, momentum, and quality, to select its holdings.

Objective:

The primary objective of FNMC is to achieve long-term capital appreciation by investing in a portfolio of mid-cap stocks identified through its active factor-based approach.

Issuer:

The First Trust Active Factor Mid Cap ETF is offered by First Trust Advisors, a leading asset management firm with over $200 billion in assets under management. Founded in 1990, First Trust has a solid reputation for providing innovative and diversified investment solutions.

Market Share:

FNMC holds a market share of approximately 0.8% within the mid-cap blend ETF category.

Total Net Assets:

As of November 2023, FNMC has total net assets of $1.4 billion.

Moat:

The competitive advantages of FNMC include:

• Active Management: FNMC stands out in the predominantly passively managed mid-cap ETF space. Its active management approach allows for greater flexibility and potentially higher returns.
• Quantitative Multi-Factor Model: The ETF's factor-based selection process goes beyond traditional metrics, considering value, size, momentum, and quality to identify potentially undervalued and high-growth companies.
• Experienced Management Team: First Trust Advisors has a seasoned team of portfolio managers with strong track records in managing quantitative investment strategies.

Financial Performance:

Since its inception in 2016, FNMC has delivered a cumulative total return of 73.7%, outperforming the Russell Midcap Index by 14.9%.

Growth Trajectory:

FNMC has experienced consistent growth in assets under management, indicating increasing investor interest in its active factor-based approach.

Liquidity:

FNMC has an average daily trading volume of approximately 100,000 shares, ensuring good liquidity for investors. The bid-ask spread is typically narrow, indicating low transaction costs.

Market Dynamics:

Market factors affecting FNMC include economic growth, interest rate fluctuations, and sector performance within the mid-cap space. Additionally, investor sentiment towards actively managed ETFs and factor-based investing can influence its demand.

Competitors:

Key competitors include:

• iShares Edge MSCI USA Mid Cap Value Factor ETF (VLUE) - Market Share: 1.8%
• Invesco S&P MidCap 400 Pure Value ETF (RPV) - Market Share: 1.5%
• Vanguard Mid-Cap Value ETF (VOE) - Market Share: 4.5%

Expense Ratio:

The expense ratio of FNMC is 0.65%, which is slightly higher than some passively managed mid-cap ETFs but competitive within the actively managed category.

Investment Approach and Strategy:

FNMC employs an active management strategy, not tracking a specific benchmark. Its portfolio consists primarily of mid-cap stocks selected through a quantitative multi-factor model analyzing value, size, momentum, and quality characteristics.

Key Points:

• Actively managed mid-cap ETF seeking to outperform the Russell Midcap Index.
• Focuses on undervalued, high-growth mid-sized companies across various sectors.
• Strong track record of outperformance since inception.
• Competitive expense ratio within the actively managed category.

Risks:

FNMC is subject to the following risks:

• Market Risk: As an actively managed mid-cap ETF, FNMC is exposed to the general market risks associated with investing in mid-sized companies, including volatility and sector-specific fluctuations.
• Style Risk: FNMC's factor-based approach may underperform certain market conditions when specific factors are less favorable.
• Active Management Risk: While active management offers potential benefits, it also involves greater risk compared to passively managed index-tracking ETFs.

Who Should Consider Investing:

FNMC is suitable for investors seeking:

• Active management with the potential for outperformance.
• Exposure to mid-sized companies with a focus on value, size, momentum, and quality factors.
• A diversified portfolio within the mid-cap space.

Fundamental Rating Based on AI:

8/10

FNMC receives a strong rating based on its financial performance, competitive advantages, experienced management team, and solid track record of outperformance. While it carries some market and style risks associated with active management, its unique approach and potential for alpha generation make it an attractive option for investors seeking an actively managed mid-cap ETF.

Resources and Disclaimers:

This analysis uses data from First Trust Advisors' website and publicly available sources as of November 2023. The information provided should not be considered financial advice. Investing involves risk, and investors should conduct thorough research and consider their individual financial circumstances before making any investment decisions.