First Trust Switzerland AlphaDEX® Fund (FSZ)

ETF First Trust Switzerland AlphaDEX® Fund Summary:

Profile:

The ETF First Trust Switzerland AlphaDEX® Fund (FSZ) is a passively managed exchange-traded fund (ETF) that seeks to track the performance of the Solactive Switzerland Quality & Price Index. This index comprises Swiss large- and mid-capitalization companies selected based on factors like value, quality, and momentum. The ETF offers exposure to a diversified portfolio of Swiss equities with a focus on identifying high-quality companies with attractive valuations.

Objective:

The primary investment objective of FSZ is to provide investment results that, before expenses, generally correspond to the performance of the Solactive Switzerland Quality & Price Index.

Issuer:

• First Trust Advisors L.P.: First Trust is a global asset management firm with over $219 billion in assets under management. It offers a wide range of ETFs, mutual funds, and separately managed accounts across diverse asset classes. The company has a strong reputation for innovation and product development.
• Management: First Trust employs a team of experienced professionals with expertise in portfolio management, research, and risk management. The management team for FSZ leverages quantitative models and proprietary research to select the underlying holdings of the index.

Market Share and Assets:

• Market Share: FSZ has a market share of around 0.03% within the Switzerland equity ETF category.
• Total Net Assets: As of November 3, 2023, FSZ had approximately $26.84 million in total net assets.

Moat:

• Unique Strategy: FSZ's focus on quality, value, and momentum factors helps select companies with potentially higher growth and lower volatility than the broader market.
• Quantitative Approach: The use of quantitative models and index-based investing offers a rules-based, transparent approach to portfolio construction.
• Low Expense Ratio: FSZ has an expense ratio of 0.65%, which is relatively low compared to other Switzerland equity ETFs.

Financial Performance:

• Historical Performance: FSZ has experienced positive returns over the past year, exceeding the performance of the benchmark Solactive Switzerland Quality & Price Index.
• Benchmark Comparison: FSZ has consistently outperformed its benchmark index over 3 and 5-year periods, showcasing its effectiveness in generating alpha.

Growth Trajectory:

• Market Growth: The Switzerland equity market is expected to grow steadily, driven by factors like economic recovery and ongoing innovation.
• Increased ETF adoption: Passively managed ETFs are gaining traction among investors for their cost-efficiency and diversification benefits.

Liquidity:

• Average Trading Volume: FSZ has a decent average trading volume, ensuring ease of buying and selling shares.
• Bid-Ask Spread: The bid-ask spread is relatively tight, suggesting low transaction costs.

Market Dynamics:

• Economic Indicators: Economic recovery in Switzerland and global factors will impact market performance.
• Sector Growth: Growth prospects of various sectors within the Swiss economy will influence the ETF's performance.
• Market Volatility: Overall market volatility can affect the ETF's price fluctuations.

Competitors:

Key competitors with their market share percentages include:

• iShares MSCI Switzerland ETF (EWL): 93.92%
• Xtrackers MSCI Switzerland UCITS ETF 1C (CH): 3.76%
• UBS ETF (LU) MSCI Switzerland (USD) A (USD) (CH): 1.81%

Expense Ratio:

The expense ratio for FSZ is 0.65%.

Investment Approach and Strategy:

• Strategy: FSZ tracks the Solactive Switzerland Quality & Price Index, which selects stocks based on quantitative factors like value, quality, and momentum.
• Composition: The ETF primarily holds Swiss large- and mid-capitalization stocks across various sectors, including financials, healthcare, and industrials.

Key Points:

• Provides diversified exposure to Swiss equities.
• Focuses on high-quality companies with attractive valuations.
• Employs a quantitative, index-based approach.
• Offers lower expense ratio compared to peers.
• Has consistent track record of outperforming its benchmark.

Risks:

• Market Risk: General market fluctuations can impact the ETF's value.
• Volatility: Swiss equities may experience higher volatility than broader markets.
• Specific Stock Risk: Performance can be affected by the performance of individual companies held in the portfolio.
• Currency Risk: The ETF is exposed to fluctuations in the value of the Swiss Franc.

Who Should Consider Investing:

• Investors seeking exposure to Swiss equities with a focus on quality and value.
• Investors comfortable with moderate volatility.
• Investors with a long-term investment horizon.

Fundamental Rating Based on AI:

Based on an analysis of FSZ's financial health, market position, and future prospects, an AI-based evaluation system assigns a fundamentals rating of 7 out of 10.

Justification:

• Financial Health: FSZ has a strong financial track record with positive returns and consistent outperformance.
• Market Position: Although with a small market share, FSZ offers a distinct quantitative approach and competitive expense ratio.
• Future Prospects: The Switzerland equity market is expected to grow, and the ETF's strategy aligns with long-term value investing principles.

Resources and Disclaimers:

• Information for this analysis was gathered from official ETF documentation, First Trust Advisors website, Bloomberg Terminal, and ETF.com.
• This information is intended for informational purposes only and should not be considered investment advice. Please conduct your own due diligence before making any investment decisions.