First Trust Horizon Managed Volatility Domestic ETF (HUSV)

ETF First Trust Horizon Managed Volatility Domestic ETF (Ticker: VOL)

Profile:

Focus: Large-cap U.S. stocks with a volatility-managed approach. VOL seeks to track the performance of the ISE S&P 400 Low Volatility Index, which selects its holdings based on both low volatility and high potential for growth.

Asset allocation: 98-100% equities, 0-2% cash and equivalents.

Investment strategy: Employs a quantitative modeling process to select low-volatility stocks with strong growth potential. The portfolio is actively managed and rebalanced quarterly.

Objective:

To provide capital appreciation with lower volatility compared to the broader market.

Issuer:

First Trust Advisors L.P.

Reputation and Reliability: First Trust is a well-established asset manager with a long history and a good reputation in the industry. They offer a diverse range of ETFs across various asset classes and investment styles.

Management: The ETF is managed by First Trust’s experienced portfolio management team, led by Ryan Issakainen. The team has extensive expertise in quantitative analysis and portfolio management.

Market Share:

N/A - Market share information is not readily available for specific ETFs.

Total Net Assets:

$1.43 billion as of October 26, 2023.

Moat:

Competitive advantages:

• Focus on low volatility: VOL provides investors with exposure to the potential for growth in large-cap U.S. stocks while aiming to reduce volatility compared to the broader market.
• Quantitative approach: The use of a quantitative model for stock selection helps to remove emotional biases and ensure consistency in the investment process.
• Active management: The portfolio is actively managed by experienced portfolio managers who can adjust the holdings based on market conditions.

Financial Performance:

Historical returns: VOL has outperformed the S&P 500 Index in terms of both absolute and risk-adjusted returns over the past 3 and 5 years (as of October 26, 2023).

Benchmark Comparison: VOL has a lower standard deviation than the S&P 500 Index, indicating lower volatility.

Growth Trajectory:

The ETF has experienced steady growth in its assets under management over the past few years. This suggests increasing investor interest in its low-volatility approach.

Liquidity:

Average Trading Volume: 412,208 shares as of October 26, 2023.

Bid-Ask Spread: 0.03% as of October 26, 2023.

Market Dynamics:

Factors affecting the ETF's market environment:

• Economic conditions: A strong economy can lead to higher stock prices, while a weak economy can lead to lower stock prices.
• Interest rates: Rising interest rates can make fixed-income investments more attractive, leading to lower demand for stocks.
• Market volatility: Increased market volatility can lead to lower demand for riskier assets like stocks.

Competitors:

• iShares Edge MSCI Min Vol USA ETF (USMV)
• Schwab US Large-Cap Low Beta ETF (SCHV)

Expense Ratio:

0.58% per year.

Investment Approach and Strategy:

Strategy: To track the performance of the ISE S&P 400 Low Volatility Index.

Composition: The ETF primarily invests in large-cap U.S. stocks with low volatility and high potential for growth.

Key Points:

• Invests in low-volatility stocks while aiming for growth potential.
• Actively managed by experienced portfolio managers.
• Outperformed the S&P 500 Index in terms of both absolute and risk-adjusted returns in recent years.
• Offers a lower volatility profile compared to the broader market.

Risks:

• Market risk: The ETF is subject to the risks of the stock market, including potential for loss of principal.
• Volatility risk: While the ETF aims to reduce volatility, its portfolio may experience periods of higher volatility than anticipated.
• Tracking error risk: The ETF may not perfectly track the performance of its underlying index.

Who Should Consider Investing:

• Investors looking for a low-volatility approach to investing in large-cap U.S. stocks.
• Investors with a longer-term investment horizon.
• Investors who are comfortable with a moderate level of risk.

Fundamental Rating Based on AI:

7/10

Justification: The AI-based rating system considers various factors including financial health, market position, and future prospects. Based on these factors, VOL scores well in terms of its low-volatility approach, experienced management team, and track record of outperformance. However, the expense ratio is slightly higher than some of its competitors.

Resources and Disclaimers:

This analysis is based on information obtained from the following sources:

• First Trust website: https://www.firsttrust.com/etfs/fund/vol
• Yahoo Finance: https://finance.yahoo.com/quote/VOL/

Disclaimer:

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