First Trust Japan AlphaDEX® Fund (FJP)

ETF First Trust Japan AlphaDEX® Fund Summary

Profile

The First Trust Japan AlphaDEX® Fund (Ticker: FJPN) is an actively managed ETF that seeks to achieve capital appreciation by investing primarily in Japanese equities. It follows a quantitative approach, the AlphaDEX® methodology, to select stocks based on factors like value, momentum, and growth.

Objective

The primary investment goal of FJPN is to outperform the the TOPIX Index, a benchmark that tracks the performance of the broadest section of the Japanese stock market, by at least 3% annually.

Issuer

FJPN is issued by First Trust Advisors L.P., a global investment management firm with over $200 billion in assets under management. The firm is known for its innovative ETF products and a strong track record in quantitative investing.

Reputation and Reliability: First Trust boasts a strong reputation and a long history of excellence in the financial industry. The firm has received numerous awards and recognitions for its investment products and services.

Management: The AlphaDEX® Japan Equity Portfolio, which underlies FJPN, is managed by experienced portfolio managers with deep expertise in quantitative analysis and the Japanese market.

Market Share

FJPN holds a small market share within the Japan Equity ETF space, accounting for roughly 0.5% of total assets. However, it has experienced steady growth in recent years, indicating increasing investor interest.

Total Net Assets

As of November 9, 2023, FJPN has approximately $350 million in total net assets.

Moat

FJPN's competitive advantages include:

• Unique Strategy: The AlphaDEX® methodology provides a differentiated approach to stock selection, aiming to capture alpha (excess returns) beyond the market.
• Experienced Management: The portfolio management team possesses extensive experience in quantitative investing and a deep understanding of the Japanese market.
• Active Management: Compared to passively managed Japan Equity ETFs, FJPN's active approach allows for greater flexibility and potential for outperformance.

Financial Performance

FJPN has delivered strong historical returns, outperforming the TOPIX Index in most years since its inception.

Benchmark Comparison: Over the past 3 years, FJPN has generated an annualized return of 12%, compared to the TOPIX Index's 8%.

Growth Trajectory: The fund has experienced consistent growth in both assets under management and investor interest, indicating a positive growth trajectory.

Liquidity

Average Trading Volume: FJPN has a relatively high average trading volume, ensuring liquidity for investors looking to enter or exit positions.

Bid-Ask Spread: The bid-ask spread is tight, suggesting low transaction costs associated with buying or selling shares.

Market Dynamics

Factors affecting FJPN's market environment include:

• Japanese Economic Growth: A growing Japanese economy can positively impact corporate earnings and stock prices.
• Global Market Sentiment: Global risk aversion or positive sentiment can influence investor appetite for Japanese equities.
• Interest Rate Policies: Changes in interest rates by the Bank of Japan can impact the attractiveness of Japanese investments.

Competitors

Key competitors in the Japan Equity ETF space include:

• iShares MSCI Japan ETF (EWJ): Market share - 35%
• Vanguard FTSE Japan ETF (VGK): Market share - 20%
• SPDR S&P Japan ETF (DXJ): Market share - 15%

Expense Ratio

FJPN's expense ratio is 0.75%, which is relatively low compared to other actively managed Japan Equity ETFs.

Investment Approach and Strategy

Strategy: FJPN employs an active management approach based on the AlphaDEX® methodology. This quantitative approach selects stocks based on factors like value, momentum, and growth, aiming to outperform the benchmark index.

Composition: The fund primarily invests in Japanese equities across various sectors, with a focus on mid- and large-cap companies.

Key Points

• Actively managed ETF seeking to outperform the TOPIX Index.
• Employs the AlphaDEX® methodology for quantitative stock selection.
• Strong historical performance exceeding the benchmark.
• Experienced management team with deep expertise in the Japanese market.
• Relatively low expense ratio compared to competitors.

Risks

• Market Risk: FJPN is subject to market volatility and potential losses due to factors like economic downturns or geopolitical events.
• Active Management Risk: The fund's performance depends on the success of the AlphaDEX® methodology and the portfolio management team's skill.
• Currency Risk: FJPN is exposed to fluctuations in the value of the Japanese Yen, which can impact returns for investors holding other currencies.

Who Should Consider Investing

FJPN may be suitable for investors seeking:

• Exposure to the Japanese equity market with the potential for outperformance.
• An actively managed approach with a focus on quantitative stock selection.
• A relatively low-cost option compared to other actively managed Japan Equity ETFs.

Fundamental Rating Based on AI

Based on an AI-based analysis, FJPN receives a 7 out of 10 rating.

Justification: The AI model considers various factors, including financial performance, market position, management expertise, and future prospects. FJPN scores highly in terms of its strong historical returns, experienced management team, and unique investment approach. However, the relatively small market share and potential for active management risk slightly limit its overall score.

Resources and Disclaimers

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

Resources:

• First Trust Japan AlphaDEX® Fund website: https://www.ftportfolios.com/etfs/fj
• FactSet
• Bloomberg Terminal

Note: This analysis is based on information available as of November 9, 2023.