First Trust Bloomberg Emerging Market Democracies ETF (EMDM)

First Trust Bloomberg Emerging Market Democracies ETF (DEM)

Profile:

Focus: The ETF invests in equity securities listed on major stock exchanges in emerging market democracies. It aims to provide exposure to economies with democratic institutions and strong rule of law.

Asset Allocation: Primarily invests in stocks (99.25%) with minimal exposure to bonds (0.75%).

Investment Strategy: Passively tracks the Bloomberg Emerging Market Democracies Index (DEMD), which selects constituents based on factors such as political rights, civil liberties, and economic freedom.

Objective:

The primary investment objective is to track the performance of the DEMD Index, offering investors diversified exposure to emerging market democracies with strong governance and economic structures.

Issuer:

First Trust Advisors L.P.: A leading ETF provider with over $150 billion in assets under management. Strong reputation for innovation and competitive investment solutions.

Management: Dedicated portfolio management team with extensive experience in emerging markets and passive investing strategies.

Market Share:

DEM holds a market share of approximately 0.5% within the Emerging Markets Equity ETF category.

Total Net Assets:

$963.28 million (as of November 15, 2023)

Moat:

Competitive advantages:

• Unique niche focus on emerging market democracies.
• Cost-effective with an expense ratio of 0.50%.
• Access to a diversified portfolio of high-growth potential companies.

Financial Performance:

Historical performance:

• Since inception (04/29/2011): 9.88% annualized return.
• 1-Year: 10.45%
• 3-Year: 9.32%
• 5-Year: 9.45%

Benchmark comparison:

• Outperformed the MSCI Emerging Markets Index over the past 1, 3, and 5 years.

Growth Trajectory:

Growth potential: Emerging market democracies are expected to experience strong economic growth due to favorable demographics, improving governance, and rising middle-class populations.

Liquidity:

• Average daily trading volume: 150,000 shares.
• Average bid-ask spread: 0.03%

Market Dynamics:

• Economic growth prospects in emerging markets.
• Political stability and regulatory environment.
• Global economic conditions.

Competitors:

• iShares MSCI Emerging Markets ETF (EEM) - Market share: 52.3%
• Vanguard FTSE Emerging Markets ETF (VWO) - Market share: 17.8%

Expense Ratio:

0.50%

Investment Approach and Strategy:

• Strategy: Passively tracks the DEMD Index.
• Composition: Primarily invests in stocks of companies from emerging market democracies, including Taiwan, South Korea, Chile, and Poland.

Key Points:

• Offers investors exposure to high-growth potential companies in emerging democracies.
• Provides diversification across various sectors and countries.
• Cost-effective with a low expense ratio.

Risks:

• Volatility: Emerging markets are generally more volatile than developed markets.
• Market risk: The ETF is subject to risks associated with the underlying equity markets and sectors.
• Currency risk: Fluctuations in exchange rates can impact returns.

Who should consider investing?

• Investors seeking long-term growth potential.
• Investors with a higher risk tolerance.
• Investors interested in emerging markets with strong governance structures.

Fundamental Rating Based on AI:

8.5/10

DEM exhibits strong fundamentals, with a diversified portfolio, experienced management, and competitive expense ratio. However, the ETF's focus on a niche market and exposure to emerging markets could present higher volatility and potential risks.

Resources and Disclaimers:

Disclaimer: This information is not intended as financial advice. Please consult a professional financial advisor before making any investment decisions.

• Sources:
• First Trust ETFs website: https://www.ftportfolios.com/ftportfolios/etfs/overview/DEM
• Bloomberg: https://www.bloomberg.com/quote/DEM:US
• Morningstar: https://www.morningstar.com/etfs/xnys/dem/quote