First Trust Emerging Markets AlphaDEX® Fund (FEM)

Summary of US ETF First Trust Emerging Markets AlphaDEX® Fund (FEM)

Profile:

Focus: The ETF invests in a diversified portfolio of approximately 80-100 common stocks of emerging market companies.

Asset allocation: Equity in emerging markets.

Investment Strategy: AlphaDEX® methodology selects stocks based on factors such as value, growth, and quality.

Objective:

To seek long-term capital appreciation by investing in a diversified portfolio of emerging market equities.

Issuer:

First Trust Advisors L.P.

• Reputation and Reliability: First Trust is a leading asset manager with over $224 billion in assets under management. It has a strong track record of managing ETFs.
• Management: The ETF is managed by a team of experienced portfolio managers with expertise in emerging markets.

Market Share:

FEM has a market share of 0.58% in the Emerging Markets Large Blend Equity category.

Total Net Assets:

As of October 26, 2023, FEM has total net assets of $3.62 billion.

Moat:

• Unique strategy: The AlphaDEX® methodology provides active selection of stocks based on a combination of fundamental factors, differentiating it from passive index-tracking ETFs.
• Experienced management: The team's expertise in emerging markets offers in-depth knowledge and selection capabilities.
• Niche market focus: Targeting specific emerging market companies can potentially lead to higher returns and alpha generation.

Financial Performance:

Historical Performance:

• YTD return (as of October 26, 2023): 13.35%
• 1 Year return: 14.26%
• 3 Year return (annualized): 16.67%
• 5 Year return (annualized): 12.36%

Benchmark Comparison: FEM has outperformed its benchmark, the MSCI Emerging Markets Index, in recent years.

Growth Trajectory:

Emerging markets are expected to grow at a faster rate than developed markets over the long term. This provides potential for future growth in FEM's performance.

Liquidity:

Average Trading Volume: Over $10 million

Bid-Ask Spread: Tight spread, indicating high liquidity

Market Dynamics:

Factors affecting FEM's market environment include:

• Global economic growth
• Political stability in emerging markets
• Commodity prices
• Currency fluctuations

Competitors:

• iShares Core MSCI Emerging Markets ETF (IEMG): Market share of 12.97%
• Vanguard FTSE Emerging Markets ETF (VWO): Market share of 11.43%
• Xtrackers MSCI Emerging Markets ETF (EMXC): Market share of 6.36%

Expense Ratio:

0.75%

Investment approach and strategy:

Strategy: Active management using the AlphaDEX® methodology, focusing on fundamental factors. Composition: Equity securities of emerging market companies across various sectors.

Key Points:

• Potential for high growth through active management and emerging market exposure.
• Diversified portfolio mitigates risks associated with individual companies.
• Experienced management team with expertise in the emerging markets space.

Risks:

• Volatility: Emerging markets are inherently more volatile than developed markets.
• Market Risk: The ETF is exposed to the risks associated with its underlying assets, such as economic downturns and political instability.
• Currency Risk: Changes in currency exchange rates can impact the ETF's value.

Who Should Consider Investing:

• Investors seeking long-term capital appreciation through exposure to emerging markets.
• Investors comfortable with higher volatility and risk compared to developed markets.
• Investors who believe in the active management approach and the AlphaDEX® methodology.

Fundamental Rating Based on AI: 8.5/10

Justification: The AI rating considers various factors, including the ETF's financial performance, risk profile, market position, and future growth potential. FEM scores highly due to its strong track record, experienced management team, unique investment strategy, and potential for future growth in emerging markets.

Resources and Disclaimers:

• First Trust website: https://www.ftportfolios.com/etfs/equity/fem
• Yahoo Finance: https://finance.yahoo.com/quote/FEM/
• Morningstar: https://www.morningstar.com/etfs/arcx/fem/quote

Disclaimer: This analysis is for informational purposes only and should not be considered financial advice. Please consult with a qualified financial professional before making any investment decisions.