First Trust Emerging Markets AlphaDEX® Fund (FEM)

Overview

The First Trust Emerging Markets AlphaDEXu00ae Fund (FXI) seeks investment results that correspond generally to the price and yield of an equity index called the NASDAQ AlphaDEXu00ae Emerging Markets Index. The fund employs a rules-based methodology to select and weight securities from a broad universe of emerging market equities, emphasizing factors like value, growth, and momentum.

Reputation and Reliability

First Trust is a well-established ETF provider with a reputation for innovative and rules-based investment strategies.

Management Expertise

First Trust has a dedicated team of investment professionals experienced in managing quantitative and factor-based ETFs.

Goal

To provide investment results that correspond generally to the price and yield of the NASDAQ AlphaDEXu00ae Emerging Markets Index.

Investment Approach and Strategy

Strategy: The fund uses a rules-based, modified equal-dollar weighted index. It selects stocks from the NASDAQ Emerging Markets Index based on growth scores (sales growth, price appreciation) and value scores (price to sales, price to book value, cash flow to price, return on assets).

Composition The ETF primarily holds stocks from emerging market countries across various sectors.

Market Share: FXI's market share within the emerging market ETF category is relatively modest compared to larger, more established funds.

Total Net Assets (AUM): 1110000000

Key Competitors

• iShares Core MSCI Emerging Markets ETF (IEMG)
• Vanguard FTSE Emerging Markets ETF (VWO)
• Schwab Emerging Markets Equity ETF (SCHE)

Competitive Landscape

The emerging markets ETF space is highly competitive, dominated by broad market-cap weighted funds like IEMG and VWO. FXI differentiates itself through its AlphaDEX methodology, which seeks to outperform the market through factor-based stock selection. However, this approach may lead to higher turnover and potentially higher costs compared to passive index trackers.

Historical Performance: Historical performance varies depending on the time period. Reviewing annual returns, 3-year, 5-year, and 10-year averages is crucial.

Benchmark Comparison: Performance should be compared against the MSCI Emerging Markets Index or a similar benchmark to assess the effectiveness of the AlphaDEX strategy.

Expense Ratio: 0.008

Average Trading Volume

The ETF has an average trading volume that indicates reasonable liquidity for most investors.

Bid-Ask Spread

The bid-ask spread is typically tight, reflecting sufficient liquidity, but it can widen during periods of market volatility.

Market Environment Factors

Economic growth in emerging markets, interest rate policies, currency fluctuations, and geopolitical events can all significantly impact the fund's performance.

Growth Trajectory

The fund's growth trajectory is linked to the overall performance of emerging market equities and the effectiveness of its AlphaDEX selection methodology. There may be adjustments to security holdings based on AlphaDEX rules.

Competitive Edge

FXIu2019s primary competitive advantage lies in its AlphaDEX methodology, which aims to identify and overweight stocks with attractive value, growth, and momentum characteristics. This rules-based approach offers a systematic alternative to traditional market-cap weighted emerging market ETFs. While factor-based investing may offer potential outperformance, its not guaranteed as it depends on market conditions. The strategy's focus on specific factors may lead to different sector and country exposures compared to its competitors.

Volatility

Emerging markets are inherently more volatile than developed markets, and FXI's AlphaDEX strategy may further amplify volatility due to its active stock selection.

Market Risk

The fund is subject to risks associated with emerging market equities, including political instability, currency risk, regulatory changes, and economic downturns.

Ideal Investor Profile

Investors seeking enhanced returns from emerging market equities through a factor-based investment approach may find FXI suitable.

Market Risk

This ETF may be suitable for long-term investors with a higher risk tolerance who are comfortable with the volatility of emerging markets and a factor-based strategy.

First Trust Emerging Markets AlphaDEXu00ae Fund seeks to outperform the emerging market equity benchmark via its factor-based, rules-driven AlphaDEXu00ae methodology. It holds stocks from emerging market countries, selected based on growth and value factors. Investors should be aware of its relatively modest market share, high expense ratio, and the inherent risks of emerging market investing. The ETF is suitable for long-term investors with high-risk tolerance that are comfortable with its active methodology to potentially enhance returns but may lead to higher volatility and sector concentration.

Data Sources:

• First Trust Website
• ETFdb.com
• Morningstar

Disclaimers:

The data provided is for informational purposes only and should not be considered investment advice. Investment decisions should be based on individual circumstances and consultation with a qualified financial advisor. Market share data is based on the most recent available information.