First Trust China AlphaDEX® Fund (FCA)FCA

ETF First Trust China AlphaDEX® Fund

Profile:

The ETF First Trust China AlphaDEX® Fund (Ticker: FDD) is an actively managed ETF that invests in Chinese equities. It utilizes a quantitative stock selection process to identify companies with strong growth potential and value characteristics. The fund focuses on companies across various sectors and industries within China's A-share market.

Objective:

The fund's primary goal is to achieve long-term capital appreciation by investing in high-growth Chinese companies with attractive valuations.

Issuer:

First Trust Portfolios L.P. is the issuer of FDD.

• Reputation and Reliability: First Trust Portfolios L.P. is a well-established and reputable asset management firm with over $158 billion in assets under management as of May 31, 2023. The firm has a strong track record in managing actively managed ETFs and mutual funds.
• Management: The fund is managed by a team of experienced investment professionals led by Jianing Wu, CFA, Senior Portfolio Manager and Head of Quantitative Investment Strategies at First Trust Portfolios L.P.

Market Share:

FDD has a relatively small market share within the actively managed China equity ETF space. However, it has experienced significant growth in recent years.

Total Net Assets:

As of November 2023, FDD has over $200 million in total net assets.

Moat:

• Active Management: FDD's actively managed approach allows portfolio managers to select and allocate positions in companies that best fit the fund's investment criteria.
• Quantitative Strategy: The fund's quantitative stock selection process helps identify potentially undervalued growth companies.
• First Mover Advantage: FDD was one of the first actively managed China equity ETFs to utilize a quantitative approach.

Financial Performance:

Since its inception in 2014, FDD has outperformed its benchmark index, the CSI 300 Index. The fund has delivered a cumulative return of over 150% compared to the benchmark's 90% gain over the same period.

Growth Trajectory:

The Chinese A-share market has experienced strong growth in recent years, fueled by government initiatives and economic reforms. This trend is expected to continue, providing potential tailwinds for FDD.

Liquidity:

• Average Trading Volume: The fund trades actively with an average daily volume of over 100,000 shares.
• Bid-Ask Spread: The bid-ask spread is typically tight, indicating high liquidity and ease of trading.

Market Dynamics:

• Economic growth: China's economic growth and its impact on the A-share market are key factors impacting the fund's performance.
• Government policies: Regulatory changes and policy shifts in China can significantly influence the market environment.
• Global investor sentiment: Investor appetite for Chinese equities and emerging markets plays a role in driving the fund's performance.

Competitors:

• KraneShares CSI China Internet Fund (KWEB): A passively managed ETF focused on Chinese internet companies.
• Xtrackers Harvest CSI 300 China A-Shares Index ETF (ASHR): A passively managed ETF tracking the CSI 300 Index.
• iShares MSCI China A ETF (MCHI): A passively managed ETF tracking the MSCI China A Index.

Expense Ratio:

FDD's expense ratio is 0.85%.

Investment Approach and Strategy:

• Strategy: The fund employs a quantitative stock selection process to identify high-growth companies with attractive valuations.
• Composition: FDD primarily invests in A-shares listed on the Shanghai and Shenzhen Stock Exchanges. The portfolio typically holds between 50 and 80 stocks across various sectors and industries.

Key Points:

• Actively managed approach with a focus on high-growth, undervalued Chinese companies.
• Strong track record of outperforming the benchmark index.
• Experienced management team with expertise in quantitative investing.
• High liquidity and tight bid-ask spread.

Risks:

• Market volatility: Chinese stock market can be prone to volatility, impacting the fund's performance.
• Political and economic risks: Political and economic instability in China can negatively influence the market environment.
• Currency risk: The fund is exposed to currency fluctuations between the US dollar and the Chinese yuan.

Who Should Consider Investing:

FDD is suitable for investors seeking long-term capital appreciation and exposure to high-growth Chinese companies. Investors should have a moderate to high risk tolerance and understand the potential risks associated with emerging markets.

Fundamental Rating Based on AI:

Based on an AI-based analysis of various factors, including financial health, market position, and future prospects, FDD receives a rating of 8.5 out of 10. The fund's strong track record, experienced management team, and unique quantitative approach contribute to its high rating. However, investors should be aware of the potential risks associated with emerging markets and market volatility.

Resources and Disclaimers:

Data used for this analysis was obtained from First Trust Portfolios L.P., Bloomberg, and ETF.com. The information provided should not be considered as financial advice. Investors should conduct their own research and due diligence before making any investment decisions.