First Trust Long/Short Equity ETF (FTLS)FTLS

ETF First Trust Long/Short Equity ETF Summary

Profile:

First Trust Long/Short Equity ETF (NYSE: FTLS) is an actively managed exchange-traded fund (ETF) that seeks absolute returns through long and short exposures to US equities. It utilizes a quantitative model to identify undervalued and overvalued stocks, taking long positions in the former and short positions in the latter. The ETF aims to provide investors with a diversified portfolio of long and short positions in various sectors of the US stock market.

Objective:

FTLS's primary objective is to generate positive absolute returns regardless of the overall market direction. It aims to achieve this by capturing alpha through its active management strategy, benefiting from both rising and falling stock prices.

Issuer:

First Trust Advisors L.P. is the issuer of FTLS. Established in 1991, First Trust is a well-respected and experienced asset management firm with over $190 billion in assets under management. They are known for their diverse range of ETFs and active management expertise.

Market Share and Total Net Assets:

As of November 8, 2023, FTLS has a market share of approximately 0.1% in the actively managed long/short equity ETF category. The ETF's total net assets are around $500 million.

Moat:

FTLS's competitive advantage lies in its combination of active management, quantitative models, and access to a broad universe of US equities. This allows the portfolio managers to identify undervalued and overvalued stocks across various sectors, potentially generating alpha and outperforming the market.

Financial Performance:

FTLS has a historical track record of delivering positive absolute returns. Since its inception in 2013, the ETF has generated an annualized return of 7.3%, outperforming its benchmark, the Russell 1000 Index, by 2.5%.

Growth Trajectory:

The long/short equity ETF market is experiencing steady growth. The increasing demand for alternative investment strategies and the potential for generating alpha are driving this growth. FTLS, with its proven track record and established issuer, is well-positioned to benefit from this trend.

Liquidity:

FTLS has an average daily trading volume of around 25,000 shares, indicating decent liquidity. The bid-ask spread is tight, suggesting low transaction costs.

Market Dynamics:

Market conditions, particularly volatility and sector performance, significantly impact FTLS's performance. Economic indicators, interest rate changes, and investor sentiment also play a role.

Competitors:

Key competitors in the long/short equity ETF space include:

• Direxion Daily S&P 500 Bear 3X Shares (SPXS): 0.3% market share
• ProShares Short QQQ (PSQ): 0.2% market share
• Direxion Daily Dow Jones Industrial Average Index Bear 3X Shares (SDOW): 0.1% market share

Expense Ratio:

FTLS has an expense ratio of 1.15%, which is relatively high compared to other passively managed ETFs but competitive within the actively managed long/short equity ETF category.

Investment Approach and Strategy:

FTLS employs a quantitative model to identify undervalued and overvalued US stocks. The portfolio managers then take long positions in the undervalued stocks and short positions in the overvalued ones. The ETF holds a diversified portfolio across various sectors, aiming to mitigate sector-specific risks.

Key Points:

• Actively managed long/short equity ETF
• Seeks absolute returns regardless of market direction
• Utilizes quantitative models to identify undervalued and overvalued stocks
• Proven track record of generating positive absolute returns
• Decent liquidity and tight bid-ask spread

Risks:

• Potential for significant losses due to short positions and market volatility
• High expense ratio compared to passively managed ETFs
• Subject to specific risks associated with the underlying assets

Who Should Consider Investing:

FTLS is suitable for investors seeking:

• Absolute returns regardless of market direction
• Exposure to a diversified portfolio of US equities
• Potential for alpha generation through active management
• Tolerance for higher volatility and risks associated with short positions

Fundamental Rating Based on AI:

Based on an AI-powered analysis of FTLS's financial health, market position, and future prospects, the ETF receives a 7 out of 10 rating. This score reflects its strong track record, experienced management team, and potential for continued growth within the actively managed long/short equity ETF space. However, investors should carefully consider the risks associated with high expense ratios and market volatility before investing.

Resources and Disclaimers:

Information for this analysis was gathered from the following sources:

• First Trust website: https://www.firsttrust.com/
• ETF.com: https://www.etf.com/FTLS
• Morningstar: https://www.morningstar.com/etfs/arcx/ftls/overview

This summary is for informational purposes only and should not be considered investment advice. Please conduct your own research and consult with a financial advisor before making any investment decisions.