First Trust Developed Markets ex-US Small Cap AlphaDEX® Fund (FDTS)

Overview

The First Trust Developed Markets ex-US Small Cap AlphaDEXu00ae Fund (FDS) aims to track the performance of an index of small capitalization growth and value stocks in developed markets outside of the United States. It utilizes an AlphaDEXu00ae methodology, which selects stocks based on quantitative factors such as growth and value metrics.

Reputation and Reliability

First Trust is a well-established ETF issuer known for its broad range of exchange-traded funds, including factor-based and actively managed strategies. They have a solid track record and a significant presence in the ETF market.

Management Expertise

The ETF is managed by First Trust Advisors L.P., a firm with extensive experience in portfolio management and ETF creation. Their team of investment professionals utilizes quantitative research and disciplined processes.

Goal

To provide capital appreciation by investing in a portfolio of companies that are constituents of the NASDAQ Developed ex-Global ex-US Small Cap Index, selected and weighted using the AlphaDEXu00ae selection methodology.

Investment Approach and Strategy

Strategy: The fund seeks to track the NASDAQ Developed ex-Global ex-US Small Cap Index, employing an AlphaDEXu00ae methodology. This methodology involves screening and ranking stocks based on specific quantitative metrics to identify potential outperformers.

Composition The ETF primarily holds common stocks of companies located in developed markets outside of the United States, with a focus on small capitalization companies exhibiting characteristics of both growth and value.

Market Share: Due to the specialized nature of developed ex-US small-cap ETFs, market share data can be dynamic and difficult to pinpoint precisely without a specific comparable index. However, FDS is a notable player within its niche.

Total Net Assets (AUM): 1340000000

Key Competitors

• iShares MSCI EAFE Small-Cap ETF (SCZ)
• Vanguard FTSE Developed Markets ETF (VEA)
• WisdomTree Europe Hedged Equity Fund (HEDJ)

Competitive Landscape

The developed ex-US small-cap ETF space is competitive, with several players offering broad exposure. FDS's AlphaDEXu00ae methodology differentiates it by actively selecting stocks based on quantitative factors, potentially offering an advantage over pure index-tracking ETFs. However, its active selection may lead to higher expense ratios and potential underperformance if the methodology does not consistently identify winning stocks.

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Benchmark Comparison: The ETF aims to outperform its benchmark index through its AlphaDEXu00ae methodology. Historically, its performance relative to its benchmark has varied, with some periods of outperformance and some of underperformance, reflecting the inherent challenges of factor-based investing.

Expense Ratio: 0.72

Average Trading Volume

The ETF typically exhibits moderate average daily trading volume, suggesting sufficient liquidity for most retail and institutional investors.

Bid-Ask Spread

The bid-ask spread for FDS is generally competitive, reflecting its status as a well-established ETF within its asset class.

Market Environment Factors

The ETF is influenced by global economic growth, currency fluctuations (as it invests outside the US), interest rate policies of developed countries, and geopolitical events. Performance can be impacted by the relative strength of small-cap stocks versus larger companies and the overall sentiment towards growth and value investing.

Growth Trajectory

FDS has maintained a stable strategy focused on its AlphaDEXu00ae methodology. Its growth trajectory is tied to the performance of developed market small-cap equities and the effectiveness of its proprietary stock selection process. Changes to strategy are infrequent, focusing on adjustments to quantitative criteria if deemed necessary.

Competitive Edge

FDS's primary competitive advantage lies in its AlphaDEXu00ae methodology, which employs a disciplined, quantitative approach to identify and select small-cap stocks in developed markets ex-US. This systematic strategy aims to capture potential alpha by focusing on fundamental characteristics like growth and value, differentiating it from broad-based index trackers. The ETF also benefits from First Trust's established reputation and operational expertise.

Volatility

FDS exhibits moderate to high historical volatility, characteristic of small-cap equities and international investments. Its returns can be more pronounced than broader market indices.

Market Risk

The ETF is subject to market risk, including currency risk (due to foreign currency exposure), interest rate risk, and the inherent volatility of small-cap stocks. Political and economic instability in developed countries can also impact performance.

Ideal Investor Profile

The ideal investor for FDS is one seeking exposure to international small-cap equities and who believes in the potential of quantitative factor-based investing to generate alpha. They should have a higher risk tolerance due to the volatility of small-cap stocks and international markets.

Market Risk

FDS is best suited for long-term investors who are comfortable with the higher risk and potential volatility associated with small-cap and international equities. It can also be considered by investors looking to diversify their portfolio with exposure to non-US small-cap growth and value opportunities.

The First Trust Developed Markets ex-US Small Cap AlphaDEXu00ae Fund (FDS) offers a quantitative approach to investing in developed market small-cap stocks outside the US. Its AlphaDEXu00ae methodology aims to outperform traditional benchmarks by selecting stocks based on growth and value metrics. While it presents opportunities for capital appreciation and diversification, investors should be aware of its inherent volatility and the risks associated with international small-cap investing. The ETF's performance is tied to global economic conditions and its unique stock selection strategy.

Data Sources:

• First Trust Official Website
• Financial Data Providers (e.g., Morningstar, Yahoo Finance)

Disclaimers:

This information is for illustrative purposes only and does not constitute investment advice. Past performance is not indicative of future results. Investors should conduct their own research and consult with a financial advisor before making any investment decisions.