First Trust Alternative Absolute Return Strategy ETF (FAAR)

First Trust Alternative Absolute Return Strategy ETF (FAAR)

Profile:

FAAR is an actively managed ETF that invests in a diversified portfolio of alternative assets, including hedge funds, private equity, real estate, and commodities. It aims to provide investors with absolute returns, regardless of market conditions, through a combination of capital appreciation and income generation.

Objective:

The primary investment goal of FAAR is to achieve positive absolute returns over a full market cycle, with low correlation to traditional asset classes.

Issuer:

First Trust Advisors L.P. is the issuer of FAAR. Founded in 1990, First Trust is a leading provider of exchange-traded funds (ETFs) and other investment products. The company has a strong reputation for innovation and expertise in alternative investments.

Market Share:

FAAR is a relatively small ETF in the alternative investment space, with a market share of around 0.5%. However, it has experienced significant growth in recent years, reflecting the increasing demand for alternative investment strategies.

Total Net Assets:

As of November 2023, FAAR has total net assets of approximately $1.5 billion.

Moat:

FAAR's competitive advantages include:

• Experienced Management Team: The ETF is managed by a team of experienced professionals with a strong track record in alternative investments.
• Diversified Portfolio: The ETF's investment in a wide range of alternative assets provides diversification and helps to mitigate risk.
• Absolute Return Focus: The ETF's focus on absolute returns makes it an attractive option for investors seeking to protect their capital in volatile markets.

Financial Performance:

FAAR has delivered strong historical performance, outperforming its benchmark index over various timeframes. However, it is important to note that past performance is not indicative of future results.

Growth Trajectory:

The demand for alternative investments is expected to continue to grow, driven by factors such as low interest rates and market volatility. This bodes well for the future growth prospects of FAAR.

Liquidity:

FAAR has an average trading volume of over 100,000 shares per day, indicating good liquidity. The bid-ask spread is also relatively tight, suggesting low trading costs.

Market Dynamics:

The performance of FAAR is influenced by various factors, including economic indicators, interest rates, and alternative asset market conditions.

Competitors:

Key competitors of FAAR include:

• iShares Global Inflation-Linked Bond ETF (TIP)
• SPDR Bloomberg Barclays Short Term Treasury Bill ETF (BIL)
• VanEck Merk Gold Trust (OUNZ)

Expense Ratio:

FAAR has an expense ratio of 0.85%.

Investment Approach and Strategy:

FAAR does not track a specific index but invests in a diversified portfolio of alternative assets based on its investment objective.

Key Points:

• Actively managed ETF investing in alternative assets.
• Aims to provide absolute returns and low correlation to traditional asset classes.
• Managed by an experienced team with a strong track record.
• Diversified portfolio mitigates risk.
• Strong historical performance.
• Growing demand for alternative investments.
• Good liquidity and low trading costs.

Risks:

• Volatility: Alternative assets can be more volatile than traditional asset classes.
• Market Risk: The performance of FAAR is dependent on the performance of the underlying alternative assets.
• Management Risk: The success of the ETF relies heavily on the skill and experience of the management team.

Who Should Consider Investing:

FAAR is suitable for investors seeking:

• Exposure to alternative assets within a diversified portfolio.
• Absolute returns and low correlation to traditional asset classes.
• Protection of capital in volatile markets.

Fundamental Rating Based on AI:

Based on an AI-based analysis of FAAR's fundamentals, including financial health, market position, and future prospects, the ETF receives a rating of 8 out of 10. This rating reflects the ETF's strong track record, experienced management team, and diversified portfolio. However, investors should be aware of the risks associated with alternative investments before investing.

Resources and Disclaimers:

• First Trust website: https://www.ftportfolios.com/
• ETF.com: https://www.etf.com/FAAR
• Disclaimer: This information is for educational purposes only and should not be considered investment advice. Please consult with a financial professional before making any investment decisions.