First Trust Horizon Managed Volatility Small/Mid ETF (HSMV)HSMV

ETF First Trust Horizon Managed Volatility Small/Mid ETF (SMDV) Overview:

Profile:

SMDV is an actively managed ETF that seeks to provide capital appreciation and volatility management by primarily investing in small and mid-capitalization U.S. equities. It uses a proprietary volatility-managed process to select and weight holdings aiming to reduce volatility compared to the broad small/mid-cap market.

Objective:

The primary objective of SMDV is to achieve long-term capital appreciation with lower volatility than the overall small/mid-cap market.

Issuer:

First Trust Advisors L.P. is the issuer of SMDV.

• Reputation and Reliability: First Trust is a well-established asset management firm with a long history of providing innovative investment solutions. As of June 30, 2023, they had over $175.4 billion in assets under management.
• Management: The portfolio management team at First Trust has extensive experience in managing volatility-controlled strategies.

Market Share:

SMDV has approximately 0.2% market share in the small/mid-cap ETF category.

Total Net Assets:

As of October 26, 2023, SMDV has $225.44 million in total net assets.

Moat:

SMDV's competitive advantages include:

• Proprietary volatility-managed process: This process aims to select and weight holdings based on their potential to reduce overall portfolio volatility.
• Active management: The ETF is actively managed by experienced portfolio managers who can adjust the portfolio based on market conditions.
• Focus on small and mid-cap equities: This segment offers potential for higher growth and lower correlation to the broader market.

Financial Performance:

• Historical performance: SMDV has generally outperformed its benchmark index, the Russell 2500 Index, since its inception in 2017. However, past performance is not indicative of future results.
• Benchmark Comparison: SMDV has consistently exhibited lower volatility than the Russell 2500 Index while delivering comparable returns.

Growth Trajectory:

SMDV has experienced steady growth in assets under management, indicating increasing investor interest in its volatility-managed approach.

Liquidity:

• Average Trading Volume: SMDV has a moderate average daily trading volume, which provides sufficient liquidity for most investors.
• Bid-Ask Spread: The bid-ask spread for SMDV is typically tight, indicating low transaction costs.

Market Dynamics:

Factors affecting SMDV's market environment include:

• Economic indicators: Economic growth, interest rates, and inflation can impact the performance of small and mid-cap stocks.
• Sector growth prospects: The growth prospects of the small and mid-cap sectors can influence the ETF's performance.
• Current market conditions: Market volatility and investor sentiment can affect the demand for volatility-managed strategies.

Competitors:

Key competitors of SMDV include:

• iShares Edge MSCI Min Vol USA Small Cap ETF (SMLV)
• Vanguard S&P Small-Cap 600 ETF (VIOO)
• iShares Core S&P Small-Cap ETF (IJR)

Expense Ratio:

The expense ratio for SMDV is 0.65%, which is slightly higher than some of its competitors.

Investment Approach and Strategy:

• Strategy: SMDV employs an active management strategy to select and weight holdings based on their potential to reduce portfolio volatility.
• Composition: The ETF primarily invests in U.S. small and mid-cap stocks. It may also hold a small percentage of cash and cash equivalents.

Key Points:

• Invests in small and mid-cap U.S. equities.
• Aims to reduce volatility compared to the broad small/mid-cap market.
• Actively managed by experienced portfolio managers.
• Has a moderate expense ratio.

Risks:

• Volatility: While aiming to reduce volatility, the ETF is still exposed to market fluctuations and may experience periods of significant price changes.
• Market Risk: The ETF's performance is tied to the performance of small and mid-cap stocks, which can be more volatile than large-cap stocks.
• Management Risk: The success of the ETF depends on the effectiveness of the portfolio management team's investment decisions.

Who Should Consider Investing:

SMDV may be suitable for investors seeking:

• Exposure to small and mid-cap U.S. equities.
• Lower volatility than the broad small/mid-cap market.
• Actively managed approach to portfolio construction.

Fundamental Rating Based on AI:

7.5/10:

SMDV's fundamentals are considered strong based on an AI analysis. The ETF has a solid track record, experienced management team, and a unique volatility-managed approach. However, the expense ratio is slightly higher than some competitors, and the overall market environment for small and mid-cap stocks can be challenging.

Resources and Disclaimers:

• First Trust Horizon Managed Volatility Small/Mid ETF website: https://www.ftportfolios.com/products/etfs/smdv
• Morningstar: https://www.morningstar.com/etfs/arcx/smdv/quote
• ETF.com: https://www.etf.com/etf/smdv

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