First Trust Developed Markets Ex-US AlphaDEX® Fund (FDT)

Overview

The First Trust Developed Markets Ex-US AlphaDEXu00ae Fund (FDD) is an actively managed exchange-traded fund that seeks to track the performance of the Nasdaq Developed ex-US AlphaDEXu00ae Index. It invests in dividend-paying stocks of companies located in developed markets outside the United States, employing a quantitative strategy that selects stocks based on a predefined set of growth and value factors. The fund aims to outperform traditional market-cap-weighted indices by focusing on companies exhibiting favorable characteristics. Its primary focus is on developed international equity markets, excluding the US. The asset allocation is entirely in equities.

Reputation and Reliability

First Trust is a well-established and reputable ETF issuer known for its diverse range of actively managed and index-tracking ETFs. They have a solid track record in product development and management, offering investors a wide array of investment solutions. The firm is generally considered reliable and has a significant presence in the ETF market.

Management Expertise

The fund is managed by First Trust Portfolios L.P., with investment advisory services provided by First Trust Advisors L.P. These entities have a team of experienced investment professionals who utilize quantitative methodologies and in-depth research to manage the fund's portfolio according to its stated objectives and index methodology.

Goal

The primary investment goal of the First Trust Developed Markets Ex-US AlphaDEXu00ae Fund is to provide capital appreciation by investing in a portfolio of dividend-paying common stocks of companies located in developed markets outside the United States that are believed to have strong growth and value characteristics.

Investment Approach and Strategy

Strategy: The ETF aims to track the Nasdaq Developed ex-US AlphaDEXu00ae Index, which is designed to identify and select stocks exhibiting characteristics associated with historical strength in growth and value metrics. This is an actively managed strategy based on a quantitative methodology rather than a passive index-tracking approach. The fund selects stocks based on factors like one-year and six-month stock price performance, cash flow to price, return on assets, return on equity, and dividend yield.

Composition The ETF primarily holds equities (stocks) of companies located in developed markets outside the United States. The specific composition is dynamically adjusted based on the quantitative screening process dictated by the underlying index methodology.

Market Share: Information on precise market share for individual ETFs within niche segments like Developed Markets Ex-US AlphaDEX strategies can be difficult to ascertain with high granularity. However, as a specialized actively managed ETF, its market share would be a fraction of the broader Developed Markets Ex-US ETF universe.

Total Net Assets (AUM): 1989300000

Key Competitors

• iShares Core MSCI EAFE ETF (IEFA)
• Vanguard FTSE Developed Markets ETF (VEA)
• iShares MSCI EAFE Small-Cap ETF (SCZ)

Competitive Landscape

The developed markets ex-US ETF space is highly competitive, dominated by large-cap index-tracking ETFs from major providers like iShares and Vanguard. These competitors often offer lower expense ratios and broader diversification. FDD's competitive advantage lies in its actively managed, quantitative AlphaDEXu00ae selection methodology, which aims for outperformance by focusing on specific growth and value factors, potentially appealing to investors seeking alpha generation beyond simple index replication. However, this active management also comes with higher fees and the inherent risk of underperforming the benchmark or its passive counterparts.

Historical Performance: FDD has demonstrated varied historical performance, with periods of outperformance and underperformance relative to its benchmark and broader developed ex-US equity markets. Its factor-based approach can lead to strong results when those factors are in favor, but it can also lag when market conditions favor different investment styles. Specific numerical data for various timeframes (e.g., 1-year, 3-year, 5-year, 10-year returns) would need to be sourced from real-time financial data providers for accurate graphical representation. For instance, hypothetical 3-year annualized return might be X%, and 5-year annualized return Y%.

Benchmark Comparison: The ETF's performance is benchmarked against the Nasdaq Developed ex-US AlphaDEXu00ae Index. Comparing FDD's returns to this specific index will reveal whether its active management strategy has successfully added value or lagged behind the index's performance over various periods. Historically, actively managed quantitative strategies can exhibit higher tracking error relative to their benchmark compared to passive ETFs.

Expense Ratio: 0.59

Average Trading Volume

The ETF generally exhibits moderate average daily trading volume, indicating reasonable liquidity for most investors.

Bid-Ask Spread

The bid-ask spread for FDD is typically within a normal range for an ETF of its size and asset class, suggesting relatively efficient trading costs for participants.

Market Environment Factors

The performance of FDD is significantly influenced by global economic conditions, geopolitical events affecting developed international markets, currency fluctuations (as it invests in non-USD denominated assets), and interest rate movements in major developed economies. Sector rotation and shifts in investor sentiment towards growth versus value stocks also play a crucial role, given its factor-based investment strategy.

Growth Trajectory

The growth trajectory of FDD is tied to the ongoing appeal of developed international equities and the effectiveness of its AlphaDEXu00ae methodology. Changes in strategy or holdings are driven by the quantitative rebalancing of the underlying index, which adjusts stock selections based on evolving growth and value metrics. Investor adoption is influenced by its performance relative to passive alternatives and its perceived ability to generate alpha.

Competitive Edge

FDD's competitive edge stems from its proprietary AlphaDEXu00ae selection methodology, which uses a quantitative approach to identify companies with strong growth and value characteristics in developed ex-US markets. This active, rules-based strategy aims to capture market inefficiencies and outperform traditional market-cap-weighted indices. By focusing on specific fundamental factors, it offers investors a differentiated approach to international equity investing that seeks to generate alpha.

Volatility

FDD's historical volatility is expected to be in line with, or potentially higher than, broad developed ex-US equity market indices, given its focused, factor-based stock selection. Its quantitative strategy can lead to concentrated positions in certain sectors or styles, which may increase its volatility during market shifts.

Market Risk

The fund is subject to the inherent risks of investing in developed international equity markets, including currency risk (fluctuations in exchange rates), political and economic instability in foreign countries, regulatory changes, and market risk associated with overall equity market movements. Specific sector risks within the developed world also apply.

Ideal Investor Profile

The ideal investor for FDD is one seeking exposure to developed international equities with a strategy aiming for outperformance. This includes investors who understand and are comfortable with quantitative investment strategies, factor investing, and the potential for active management to deviate from benchmark performance. Investors should have a moderate to high risk tolerance.

Market Risk

FDD is most suitable for long-term investors who believe in the efficacy of factor-based investing and are looking to diversify their international equity holdings beyond broad index funds. It can also be considered by investors who are comfortable with the active management aspect and its potential for alpha generation, while acknowledging the associated fees and risks.

The First Trust Developed Markets Ex-US AlphaDEXu00ae Fund (FDD) is an actively managed ETF that targets developed international equities using a quantitative AlphaDEXu00ae methodology. It aims to outperform by selecting stocks based on growth and value factors, differentiating itself from passive index trackers. While offering a unique approach, it faces competition from larger, lower-cost ETFs in its space. Investors should consider its historical performance, expense ratio, and the inherent risks of international equity markets and active management.

Data Sources:

• First Trust Funds Website (Data related to ETF holdings, strategy, and expense ratios)
• Financial data providers (e.g., Morningstar, Bloomberg - for historical performance and AUM figures)
• Industry analysis reports (for competitive landscape and market share estimations)

Disclaimers:

This information is for informational purposes only and should not be considered investment advice. Past performance is not indicative of future results. Investment in ETFs involves risk, including the possible loss of principal. The data provided is based on publicly available information and may not be entirely up-to-date. Investors should consult with a qualified financial advisor before making any investment decisions.