First Trust China AlphaDEX® Fund (FCA)

Overview

The First Trust China AlphaDEXu00ae Fund (FCA) seeks investment results that correspond generally to the price and yield, before fees and expenses, of an equity index called the StrataQuantu00ae China Index. It uses the AlphaDEXu00ae stock selection methodology to identify and weight stocks in the Chinese market based on growth factors including sales growth, price appreciation, and momentum, along with value factors like book value to price, cash flow to price, and return on assets.

Reputation and Reliability

First Trust is a well-known and established ETF provider with a generally positive reputation.

Management Expertise

First Trust Advisors L.P. has significant experience in managing ETFs, including those focused on international markets and employing active stock selection strategies.

Goal

Seeks investment results that correspond generally to the price and yield, before fees and expenses, of the StrataQuantu00ae China Index.

Investment Approach and Strategy

Strategy: Tracks a modified index focused on Chinese equities selected and weighted based on quantitative growth and value factors.

Composition Primarily holds stocks of Chinese companies across various sectors. It rebalances and reconstitutes quarterly.

Market Share: Data for specific current market share is difficult to ascertain precisely; estimates suggest a relatively small to moderate market share in the broader China ETF category.

Total Net Assets (AUM): 48790000

Key Competitors

• MCHI
• ASHR
• KWEB
• GXC

Competitive Landscape

The China ETF market is highly competitive, with several large funds offering broad exposure to Chinese equities. FCA distinguishes itself with its AlphaDEXu00ae methodology, which aims for enhanced returns through quantitative factor-based stock selection, but this approach hasn't always translated into superior performance. Its smaller size compared to giants like MCHI and KWEB means it may have lower liquidity and could be more volatile.

Historical Performance: Historical performance data should be sourced from financial data providers like Bloomberg, Yahoo Finance, or the First Trust website. Due to the dynamic nature of the data, it can't be provided here but should be analyzed across 1-year, 3-year, 5-year, and 10-year periods.

Benchmark Comparison: Compare the ETF's performance to the MSCI China Index or the CSI 300 Index. Obtain this data from financial data providers.

Expense Ratio: 0.8

Average Trading Volume

The average trading volume can vary, but generally, FCA exhibits moderate trading activity, which can affect the ease of buying and selling shares.

Bid-Ask Spread

The bid-ask spread is generally wider than more liquid ETFs due to the fund's size and trading volume, which can increase the cost of trading.

Market Environment Factors

Economic indicators in China, regulatory changes, and global trade conditions significantly impact FCA's performance. Sector-specific growth prospects within the Chinese economy also play a crucial role.

Growth Trajectory

The growth trajectory of FCA depends heavily on the performance of the Chinese stock market and the effectiveness of the AlphaDEXu00ae strategy. Changes to the underlying index or the methodology could influence future performance.

Competitive Edge

FCA's competitive edge lies in its AlphaDEXu00ae methodology, a quantitative approach that selects and weights stocks based on both growth and value factors. This distinguishes it from passive, market-cap-weighted China ETFs and aims to outperform the broad market. The AlphaDEXu00ae approach provides a more active management style compared to traditional passive indexing, which could be attractive to investors seeking potentially higher returns. However, this approach also carries the risk of underperforming the market if the factor selection is not successful.

Volatility

FCA's volatility tends to be relatively high due to its focus on Chinese equities, which are subject to market fluctuations and regulatory risks.

Market Risk

Specific risks include regulatory risk in China, currency risk (exposure to the Yuan), and the broader economic risks associated with investing in emerging markets.

Ideal Investor Profile

The ideal investor is someone who is comfortable with the risks associated with investing in Chinese equities and seeks a potentially higher return than broad market ETFs, understanding the increased volatility.

Market Risk

FCA is best suited for long-term investors with a higher risk tolerance who are seeking exposure to the Chinese market and are willing to accept the potential for volatility.

The First Trust China AlphaDEXu00ae Fund offers a unique approach to investing in Chinese equities by employing a quantitative AlphaDEXu00ae methodology that selects and weights stocks based on growth and value factors. This strategy distinguishes it from standard market-cap-weighted China ETFs, aiming for potential outperformance. However, investors should be aware of the relatively high expense ratio and the inherent risks associated with investing in emerging markets, particularly China. The fund's success is closely tied to the performance of the Chinese economy and the effectiveness of its stock selection process; thus, it's most suitable for risk-tolerant, long-term investors.

Data Sources:

• First Trust website
• Bloomberg
• Yahoo Finance
• ETF.com

Disclaimers:

The data and analysis provided are for informational purposes only and do not constitute investment advice. Investment decisions should be based on individual research and consultation with a qualified financial advisor. Market share data is estimated based on publicly available information and may not be precise.