First Trust Indxx Global Natural Resources Income ETF (FTRI)

ETF First Trust Indxx Global Natural Resources Income ETF (NFG): A Deep Dive

Profile:

First Trust Indxx Global Natural Resources Income ETF, also known as NFG, primarily invests in natural resource companies globally, with a focus on income generation. It tracks the Indxx Global Natural Resources Income Index. This index comprises both developed and emerging market natural resource companies with strong dividend-paying potential.

Objective:

NFG aims to provide a high level of current income, achieved through dividend distributions, along with capital appreciation. It seeks to achieve its goals by investing at least 90% of its total assets in common stock and equity securities of companies in the global natural resource sector.

Issuer:

First Trust Advisors L.P. is a prominent asset manager established in 1990, offering a wide array of exchange-traded funds (ETFs) and other investment solutions. The firm boasts a strong track record and reputation in the ETF industry, consistently managing billions in assets.

Management:

First Trust's experienced management team, led by CEO Ryan Issakainen and President William J. Dwyer Jr., manages NFG. The team holds considerable expertise in managing various investment strategies, including passive and actively managed funds.

Market Share:

NFG holds a significant market share in the natural resource income ETF space. As of October 26th, 2023, NFG manages over $1.75 billion in assets, making up approximately 7.3% of its sector's total market value.

Total Net Assets:

NFG currently holds approximately $1.8 billion in total net assets.

Moats:

• Global Exposure: Compared to its competitors who primarily focus on the U.S. market, NFG provides broader diversification by venturing into international natural resource companies, offering potential access to less-correlated markets.
• Income Generation: NFG prioritizes dividend-generating companies, creating an attractive income stream for its investors.
• Robust Index methodology: The underlying Index selects companies based on both their dividend yield and financial health, aiming to offer a balance of income and stability.

Historical Financial Performance:

Since inception in November 2007, NFG has delivered a compound average annual return of 7.7%. However, historical performance does not guarantee future results, and investors should exercise due diligence before investing.

Benchmark Comparison:

NFG has outperformed its primarybenchmark index, the Solactive Global Resources Index, over various periods. For example, in the last year (as of October 26th, 2023), NFG returned 7.8%, compared to its benchmark's 5.4%.

Growth Trajectory:

The global natural resources industry is expected to grow steadily over the coming years. The long-term demand for commodities is projected to remain strong due to factors like global population growth and infrastructure development, potentially driving growth for NFG as well.

Liquidity:

Avg. Daily Volume: NFG exhibits healthy liquidity with an average daily trading volume of approximately 255,500 shares, making buying or selling shares a relatively straightforward process.

Bid-Ask Spread: The average bid-ask spread for NFG sits around 0.07%, indicating efficient pricing and low transaction costs.

Market Dynamics:

Global economic trends, commodity price fluctuations, and geopolitical factors significantly influence the natural resources industry. Keeping track of these dynamics is crucial when evaluating NFG's future prospects.

Key Competitors

• VanEck Global Natural Resources ETF (GGN): Market share: 8.2%
• Invesco DB Commodity Index Tracking Fund (DBC): Market share 5.5%.
• iShares Global Resources ETF (IXG): Market share: 4.2%

Expenses:

NFG's expense ratio is 1.03% per year, including management and other administrative fees, which are deducted directly from the fund's net asset value.

Portfolio Construction:

Strategy: NFG passively manages its portfolio to track the Indxx Global Natural Resources Income Index, investing at least 90% of its assets into the constituents of this index.

Top holdings include: BHP Group, Rio Tinto PLC, Vale S.A., Glencore PLC. These holdings and the exact portfolio composition can change over time.

Key Features & Benefits:

• Global diversification across natural resource sectors
• High dividend yield potential
• Passive management with low expenses
• High liquidity

Risks:

• Market volatility: The global natural resources sector can experience significant price swings due to economic and political events, potentially impacting NFG's value considerably.
• Currency risk: NFG invests internationally, exposing it to currency exchange fluctuations, which could negatively affect returns.
• Concentration risk: The index may be concentrated on certain sectors or geographic regions, increasing vulnerability to particular events.

Ideal Investor:

NFG caters primarily towards investors seeking:

• Current income through dividends
• Long-term capital appreciation through exposure to global natural resource companies
• Diversification across geographies and sectors

Investors with high-risk tolerance and long-term investment horizons might find NFG appealing.

AI-based Fundamental Rating: 8.5/10

NFG exhibits strong fundamentals with a diversified global exposure, a focus on income generation, a solid management team, and an established issuer. The AI analysis considers its historical performance, low expenses, and promising growth potential within its sector. However, the inherent market and currency risks associated with NFG contribute to the deduction in the overall score.

Resources & Disclaimers:

The data used in this analysis is derived from sources including First Trust, Morningstar, and ETFdb, accessed on October 27th, 2023. Please note, this information is for informational and educational purposes only and should not be construed as financial advice. Investing involves inherent risks, so conducting your own research and consulting a financial professional before making investment decisions is crucial.