First Trust Managed Futures Strategy Fund (FMF)

Overview

The First Trust Managed Futures Strategy Fund (FMS) is an actively managed ETF that seeks to profit from both rising and falling price movements in a diversified portfolio of global futures contracts across various asset classes including currencies, commodities, fixed income, and equity indices. Its primary focus is on capturing trends in these markets.

Reputation and Reliability

First Trust is a well-established and reputable provider of exchange-traded funds with a diverse range of strategies and a long history in the financial industry. They are known for their innovative approach to ETF product development.

Management Expertise

The fund is managed by First Trust Advisors L.P., an investment advisor with extensive experience in quantitative research and systematic trading strategies. The management team leverages proprietary models to identify and execute trades in futures markets.

Goal

The primary investment goal of the First Trust Managed Futures Strategy Fund is to seek positive absolute returns regardless of market conditions, aiming for capital appreciation.

Investment Approach and Strategy

Strategy: The ETF does not track a specific index. Instead, it employs a managed futures strategy that involves actively trading in a diversified portfolio of global futures contracts. The strategy is trend-following in nature, aiming to capture medium to long-term price movements.

Composition The ETF's holdings consist primarily of futures contracts on a wide range of asset classes, including currencies (e.g., USD, EUR, JPY), commodities (e.g., crude oil, gold, agricultural products), fixed income (e.g., US Treasury futures), and equity indices (e.g., S&P 500 futures).

Market Share: As a specialized managed futures ETF, its market share within the broader ETF universe is relatively small, but it occupies a significant position within the niche of managed futures strategies.

Total Net Assets (AUM): 516000000

Key Competitors

• WisdomTree Managed Futures Strategy Fund (WTMF)
• KFA Mount Lucas Index Strategy ETF (KMLM)

Competitive Landscape

The managed futures ETF space is less crowded than traditional equity or bond ETFs. First Trust Managed Futures Strategy Fund (FMS) benefits from its active management and diversified approach. Competitors like WTMF and KMLM also offer managed futures strategies, but may differ in their specific methodologies, asset allocations, and fee structures. FMS's advantage lies in its established track record and broad futures exposure, while potential disadvantages might include higher expense ratios compared to passive ETFs and the inherent risks of active management.

Historical Performance: Historical performance data for FMS shows its ability to generate returns in various market environments. Over the past 1, 3, and 5 years, the ETF has exhibited fluctuating returns, demonstrating its sensitivity to market trends and its potential to outperform in specific conditions where its strategies are effective. Detailed year-over-year returns are available from financial data providers.

Benchmark Comparison: FMS does not track a specific benchmark index as it is an actively managed strategy. Its performance is typically evaluated against its own objective of achieving positive absolute returns and compared to broader managed futures indices or peer group averages.

Expense Ratio: 0.95

Average Trading Volume

The ETF's average trading volume is moderate, indicating reasonable liquidity for most investors but potentially less than that of highly popular broad-market ETFs.

Bid-Ask Spread

The bid-ask spread for the ETF is generally competitive, reflecting efficient market making and a reasonable cost for entering and exiting positions.

Market Environment Factors

FMS is influenced by macroeconomic factors such as inflation, interest rates, geopolitical events, and global economic growth. Trends in commodity prices, currency exchange rates, and equity market sentiment directly impact its performance.

Growth Trajectory

The growth trajectory of FMS is tied to the broader interest in alternative investment strategies and managed futures as a diversification tool. Changes in its strategy or holdings would be driven by the proprietary models of its management team in response to evolving market conditions.

Competitive Edge

First Trust Managed Futures Strategy Fund (FMS) possesses a competitive edge through its actively managed, diversified futures trading strategy. This approach allows it to potentially capitalize on both bullish and bearish trends across various asset classes, offering an alternative to traditional long-only investments. The fund's systematic methodology, backed by First Trust's expertise, provides a structured and disciplined way to navigate complex global markets, aiming for uncorrelated returns.

Volatility

FMS exhibits moderate to high historical volatility, which is characteristic of managed futures strategies that aim for significant returns but also carry increased risk due to leverage and the nature of futures trading.

Market Risk

The primary market risks for FMS stem from the volatility of the underlying futures contracts it trades. This includes commodity price fluctuations, currency exchange rate movements, interest rate changes affecting fixed income futures, and equity market downturns affecting index futures. Leverage used in futures trading can amplify both gains and losses.

Ideal Investor Profile

The ideal investor for FMS is one seeking diversification beyond traditional stock and bond portfolios, aiming for absolute returns, and comfortable with the risks associated with futures trading and active management. Investors with a medium to high-risk tolerance and a longer-term investment horizon would be most suitable.

Market Risk

FMS is best suited for investors looking for an alternative or tactical allocation to complement their existing portfolios, rather than a core passive index-tracking investment. It is more aligned with active traders or sophisticated investors who understand the nuances of managed futures.

The First Trust Managed Futures Strategy Fund (FMS) is an actively managed ETF designed to generate absolute returns by trading global futures across diverse asset classes. Its strength lies in its trend-following strategy, aiming to profit from both rising and falling markets. While offering diversification benefits, FMS carries moderate to high volatility and is best suited for investors seeking alternative strategies and comfortable with futures market risks.

Data Sources:

• First Trust Investments Website
• Financial Data Providers (e.g., Morningstar, ETF.com, Bloomberg)

Disclaimers:

The information provided is for informational purposes only and does not constitute financial advice. Investment decisions should be based on an investor's own research and consultation with a qualified financial advisor. Past performance is not indicative of future results. Data may be subject to change and may not be entirely accurate or complete.