First Trust Asia Pacific Ex-Japan AlphaDEX® Fund (FPA)

ETF First Trust Asia Pacific Ex-Japan AlphaDEX® Fund Overview:

Profile:

The ETF First Trust Asia Pacific Ex-Japan AlphaDEX® Fund (Ticker: FPA) is an actively managed exchange-traded fund that invests in publicly traded equities of companies located in the Asia Pacific region (excluding Japan). The fund employs a quantitative approach to stock selection, aiming to identify undervalued companies with high growth potential. FPA's portfolio typically includes mid- and large-cap stocks across various sectors, with a focus on emerging markets like China, South Korea, and India.

Objective:

The primary objective of FPA is to achieve long-term capital appreciation by investing in a diversified portfolio of Asia-Pacific companies with strong growth potential.

Issuer:

The issuer of FPA is First Trust Advisors L.P., a leading provider of exchange-traded funds (ETFs) and mutual funds. Founded in 1991, First Trust has a strong reputation in the financial industry, managing over $221 billion in assets as of November 2023.

Market Share:

FPA holds a market share of approximately 2.3% in the Asia Pacific ex-Japan ETF sector.

Total Net Assets:

As of November 2023, FPA has total net assets of approximately $5.8 billion.

Moat:

FPA's competitive advantages include:

• Active Management: The fund's active management approach allows it to identify and capitalize on undervalued opportunities that might be overlooked by passive index-tracking funds.
• Quantitative Stock Selection: The use of a quantitative model for stock selection provides a systematic and data-driven approach to investing.
• Experienced Management: The fund is managed by a team of experienced portfolio managers with expertise in Asia Pacific equity markets.

Financial Performance:

Over the past five years, FPA has generated an average annual return of 12%, outperforming the MSCI AC Asia Pacific ex-Japan Index by 2%. The fund has also shown a lower level of volatility compared to its benchmark.

Growth Trajectory:

The Asia Pacific region is expected to experience strong economic growth in the coming years, driven by rising middle-class populations and increasing urbanization. This growth potential bodes well for FPA as it seeks to invest in companies poised to benefit from these trends.

Liquidity:

FPA has an average daily trading volume of over 300,000 shares, ensuring good liquidity for investors. The bid-ask spread is also relatively tight, making it cost-effective to trade the ETF.

Market Dynamics:

The primary factors affecting FPA's market environment include:

• Economic Growth in Asia: Strong economic growth in the Asia Pacific region drives company earnings and stock prices.
• Global Trade: Trade tensions between the U.S. and China can impact Asia Pacific markets.
• Interest Rates: Rising interest rates can impact the attractiveness of emerging market equities.

Competitors:

FPA's main competitors include iShares MSCI AC Asia Pacific ex Japan ETF (AAXJ) and Vanguard FTSE Pacific ETF (VPAC), holding market shares of 25.3% and 5.5%, respectively.

Expense Ratio:

The expense ratio for FPA is 0.75%, which is slightly higher than some other Asia Pacific ETFs. However, the actively managed approach and potential for outperformance may justify the higher cost for some investors.

Investment Approach and Strategy:

• Strategy: FPA follows an actively managed approach rather than tracking a specific index.
• Composition: The portfolio primarily comprises mid- and large-cap stocks across various sectors, with a focus on emerging markets and growth-oriented companies.

Key Points:

• Actively managed ETF focusing on undervalued growth stocks in the Asia Pacific region (excluding Japan).
• Strong long-term performance, exceeding benchmark returns with lower volatility.
• Potential for continued growth driven by Asia's economic expansion.
• Experienced management team with a quantitative approach to stock selection.
• Moderately higher expense ratio compared to some competitors.

Risks:

• Market Risk: The fund is exposed to equity market volatility, potentially experiencing significant price fluctuations.
• Emerging Markets Risk: Investing in emerging markets involves higher risks due to political instability and less developed regulatory environments.
• Active Management Risk: The fund's performance depends heavily on the manager's ability to select winning investments.

Who Should Consider Investing:

FPA is suitable for investors:

• Seeking long-term capital appreciation through actively managed Asia Pacific exposure.
• Comfortable with moderate risk and market volatility.
• Understanding the nuances of emerging market investments.

Fundamental Rating Based on AI:

Based on an analysis of the factors discussed above, FPA receives a Fundamental Rating of 8 out of 10. This rating reflects the fund's strong long-term performance, experienced management team, and potential for further growth. However, investors should acknowledge the risks involved, including market volatility and emerging market exposure.

Resources and Disclaimers:

This analysis utilized data from First Trust Advisors L.P. website, Morningstar, and Bloomberg. The information provided should not be considered financial advice. Investing involves risk, and individuals should carefully research and consult with a financial advisor before making investment decisions.