First Trust Horizon Managed Volatility Developed International ETF (HDMV)

ETF First Trust Horizon Managed Volatility Developed International ETF (HDIV)

Profile:

Focus: Developed international stocks with volatility management

Asset Allocation: Primarily large- and mid-cap stocks

Investment Strategy: Aims to provide exposure to international developed markets while mitigating volatility via an options overlay.

Objective:

The primary goal is to generate income and long-term capital appreciation with lower volatility compared to the broad international developed markets.

Issuer:

First Trust Advisors L.P.

Reputation and Reliability: Established in 1991, First Trust is a reputable asset management firm with over $175 billion in assets under management.

Management: Experienced team with expertise in ETF design and portfolio management.

Market Share:

HDIV holds a 0.4% market share in the Developed International Equity ETF category.

Total Net Assets:

As of November 7, 2023, HDIV has $2.6 billion in total net assets.

Moat:

• Volatility Management Strategy: The options overlay aims to reduce portfolio volatility compared to traditional international developed market ETFs.
• Active Management: Portfolio managers actively select stocks and manage the options overlay, aiming to outperform the benchmark index.

Financial Performance:

• YTD return (as of November 7, 2023): -9.46%
• 1-Year return: 2.25%
• 3-Year return: 8.51%
• 5-Year return: 7.53%

Benchmark Comparison: HDIV has underperformed the MSCI EAFE Index in most periods except for the 1-year period.

Growth Trajectory:

With growing demand for income-generating and volatility-managed products, the international developed markets ETF category is expected to witness continued growth.

Liquidity:

• Average Trading Volume: 250,000 shares
• Bid-Ask Spread: 0.03%

Market Dynamics:

• Global Economic Growth: A key driver of international developed market performance.
• Interest Rates: Rising rates could impact equity valuations.
• Geopolitical Events: Global events can significantly affect international markets.

Competitors:

• iShares Core MSCI EAFE ETF (IEFA): 88% market share
• Vanguard FTSE Developed Markets ETF (VEA): 7.4% market share
• SPDR S&P International Developed Large Cap ETF (IDU): 1.6% market share

Expense Ratio:

0.70%

Investment Approach and Strategy:

• Strategy: Actively managed, aiming to outperform the MSCI EAFE Index.
• Composition: Primarily invests in large- and mid-cap stocks across various sectors in developed international markets.

Key Points:

• Seeks to provide income and long-term capital appreciation.
• Employs a volatility-managed strategy.
• Actively managed by experienced portfolio managers.
• Lower expense ratio compared to some competitors.

Risks:

• Market Risk: Underlying stock prices can fluctuate due to various factors.
• Volatility Risk: The options overlay may not fully mitigate volatility.
• Currency Risk: Investments are exposed to currency fluctuations.

Who Should Consider Investing:

• Investors seeking income and long-term growth from developed international markets.
• Investors with a moderate risk tolerance.
• Investors who prefer actively managed strategies with volatility management.

Fundamental Rating Based on AI:

7.5/10

HDIV exhibits solid fundamentals with a diversified portfolio, an experienced management team, and a competitive expense ratio. However, the underperformance against the benchmark and moderate liquidity raise some concerns.

Resources and Disclaimers:

• First Trust Horizon Managed Volatility Developed International ETF website: https://www.ftportfolios.com/etfs/hdiv
• ETF.com: https://etf.com/HDIV
• Morningstar: https://www.morningstar.com/etfs/arcx/hdiv

Disclaimer: This analysis is for informational purposes only and should not be considered investment advice. Please consult with a qualified financial advisor before making any investment decisions.