First Trust Horizon Managed Volatility Developed International ETF (HDMV)

Overview

The First Trust Horizon Managed Volatility Developed International ETF (NASDAQ: HVMI) is designed to seek current income and capital appreciation. It aims to achieve this by investing in a diversified portfolio of equity securities of companies located in developed international markets that exhibit relatively lower volatility. The strategy focuses on managing overall portfolio volatility.

Reputation and Reliability

First Trust is a well-established and reputable issuer of exchange-traded funds (ETFs) and mutual funds, known for its diverse range of investment strategies and a solid track record in the asset management industry.

Management Expertise

The ETF is managed by First Trust Advisors L.P., which employs a team of experienced investment professionals dedicated to constructing and managing portfolios with a focus on risk management and volatility control.

Goal

To provide investors with exposure to developed international equity markets while seeking to manage and reduce overall portfolio volatility compared to broader market benchmarks.

Investment Approach and Strategy

Strategy: The ETF employs a quantitative approach to select securities. It aims to identify companies with lower historical volatility and then constructs a portfolio that seeks to achieve a target volatility level, often through diversification and sector allocation adjustments.

Composition The ETF primarily holds equity securities of companies in developed international markets, such as Europe, Japan, and Australia. The specific holdings are dynamic and change based on the managed volatility strategy.

Market Share: As of recent data, HVMI holds a niche position within the developed international equity ETF market. Its specific focus on managed volatility differentiates it from broad-market international ETFs, resulting in a smaller but targeted market share.

Total Net Assets (AUM): 169774000

Key Competitors

• iShares MSCI EAFE ETF (EFA)
• Vanguard FTSE Developed Markets ETF (VEA)
• iShares Core MSCI EAFE ETF (IEFA)

Competitive Landscape

The developed international equity ETF market is highly competitive, dominated by broad-market index-tracking ETFs from major providers like iShares and Vanguard. HVMI's competitive advantage lies in its managed volatility strategy, appealing to investors seeking downside protection and lower correlation to market swings. However, its actively managed approach and potentially higher expense ratio compared to passive alternatives could be disadvantages.

Historical Performance: Historical performance data for HVMI shows its ability to provide downside protection during volatile periods. However, its performance may lag broader international indices during strong bull markets due to its risk-mitigation focus. Specific performance figures vary by period.

Benchmark Comparison: HVMI is typically benchmarked against indices such as the MSCI EAFE Index, but its performance will deviate due to its active management and volatility targeting strategy.

Expense Ratio: 0.6

Average Trading Volume

The ETF exhibits moderate average trading volume, which generally ensures reasonable liquidity for most investors.

Bid-Ask Spread

The bid-ask spread for HVMI is typically tight enough for active traders to execute trades without significant slippage, reflecting its accessibility within the ETF market.

Market Environment Factors

Factors such as global economic growth, interest rate movements in major economies, geopolitical events, and currency fluctuations significantly impact the performance of developed international equities. HVMI's strategy aims to mitigate some of these risks through volatility management.

Growth Trajectory

The growth of HVMI is linked to investor demand for international equity exposure with a risk-management overlay. Changes in its strategy and holdings are driven by the quantitative model's assessment of market conditions and individual security volatilities.

Competitive Edge

HVMI's primary competitive edge is its managed volatility strategy, which aims to reduce downside risk and provide a smoother investment experience for investors in developed international markets. This systematic approach, focused on identifying and holding lower-volatility securities, offers a distinct alternative to broad-market international ETFs. The ETF's quantitative methodology ensures a rules-based, disciplined selection process.

Volatility

As a managed volatility ETF, HVMI aims to exhibit lower historical volatility than broad international equity indices. Its strategy is designed to dampen the impact of market downturns.

Market Risk

The ETF is subject to market risk, including currency risk (fluctuations in foreign exchange rates), political and economic risks in the countries where it invests, and the general risks associated with equity investments.

Ideal Investor Profile

The ideal investor for HVMI is one seeking diversified exposure to developed international equities with a preference for capital preservation and reduced volatility. Investors looking for a complement to their existing portfolio that may offer a smoother ride through market cycles would find this ETF suitable.

Market Risk

HVMI is best suited for long-term investors who understand and value a managed volatility approach, and who wish to mitigate downside risk in their international equity allocation. It is less suitable for active traders solely focused on maximizing short-term gains in rapidly rising markets.

The First Trust Horizon Managed Volatility Developed International ETF (HVMI) offers a unique approach to developed international equity investing by prioritizing volatility management. It aims to provide current income and capital appreciation through a diversified portfolio of lower-volatility securities. While it may not capture the full upside of bull markets, its strategy is designed to offer downside protection and a more stable investment experience, making it suitable for risk-conscious long-term investors.

Data Sources:

• First Trust Investments
• Financial data providers (e.g., Bloomberg, Morningstar)

Disclaimers:

This information is for informational purposes only and should not be considered investment advice. Past performance is not indicative of future results. Investors should consult with a financial advisor before making any investment decisions. Data points like market share and AUM are subject to change.