First Trust Multi-Manager Small Cap Opportunities ETF (MMSC)

ETF First Trust Multi-Manager Small Cap Opportunities ETF (SRLM)

Profile

Target Sector: Small-cap US equities

Asset Allocation: Primarily invests in small-cap stocks across various sectors

Investment Strategy: Actively managed by a team of experienced sub-advisors, primarily employing a long-short strategy aiming to outperform the small-cap market

Ticker Symbol: SRLM

Expense Ratio: 1.34%

ISIN: US35255G1076

Objective

The ETF seeks to achieve long-term capital appreciation by investing primarily in small-cap US equities using a combination of long and short positions.

Issuer

First Trust Advisors L.P.

Reputation and Reliability: First Trust is a well-established asset management firm with a strong reputation for innovation and expertise in thematic ETFs.

Management: The ETF is managed by a team of experienced sub-advisors with diverse investment styles and expertise in small-cap investing.

Market Share

SRLM has a relatively small market share within the small-cap equity ETF space, accounting for approximately 0.1% of the total assets in the sector.

Total Net Assets

SRLM has approximately $121.41 million in total net assets as of October 26, 2023.

Moat

SRLM differentiates itself through its unique multi-manager approach, leveraging the expertise of multiple sub-advisors with individual investment styles and philosophies. This approach aims to provide diversification and potentially enhance risk-adjusted returns.

Financial Performance

Historical Performance: SRLM has generated an annualized return of 11.35% since its inception in 2014, outperforming its benchmark, the Russell 2000 Index, which returned an annualized 9.53% during the same period.

Benchmark Comparison: SRLM has consistently outperformed its benchmark index, showcasing its active management capabilities.

Growth Trajectory

The small-cap market is expected to experience moderate growth in the coming years, driven by factors such as an improving economic outlook and potential investment opportunities in innovative and emerging companies.

Liquidity

Average Trading Volume: SRLM has a relatively low average trading volume of approximately 17,000 shares per day.

Bid-Ask Spread: SRLM has a bid-ask spread of approximately 0.25%, indicating fair trading efficiency.

Market Dynamics

Economic Indicators: A moderate economic growth outlook generally favors small-cap companies that tend to be more sensitive to economic cycles.

Sector Growth Prospects: The future performance of the ETF closely relies on the growth prospects of small-cap companies across various sectors. Analyzing individual sectors and identifying potential opportunities is crucial for gauging the ETF's future performance.

Competitors

• iShares S&P Small-Cap 600 Growth ETF (IJT): Market Share: 16.72%
• Vanguard Small-Cap Growth ETF (VBK): Market Share: 14.18%
• SPDR S&P 600 Small Cap Growth ETF (SLYG): Market Share: 12.34%

Investment Approach and Strategy

• Strategy: Actively managed, utilizes a long-short strategy to generate alpha beyond market returns.
• Composition: Primarily invests in small-cap US equities across various sectors.

Key Points

• Actively managed by experienced sub-advisors with diverse investment styles.
• Aims to outperform the small-cap market through a long-short strategy.
• Has consistently outperformed its benchmark index since inception.
• Relatively low trading volume and manageable bid-ask spread.

Risks

• Volatility: The ETF is actively managed and invests in small-cap equities, which are inherently more volatile than large-cap stocks.
• Market Risk: The ETF's performance is directly tied to the performance of the small-cap market, which can be subject to significant fluctuations due to various economic and market factors.
• Manager Risk: The ETF's success relies heavily on the skill and performance of its sub-advisors.

Who Should Consider Investing

• Investors seeking long-term capital appreciation through exposure to small-cap US equities.
• Investors comfortable with a higher risk profile given the ETF's active management and focus on small-cap stocks.
• Investors looking for an alternative to traditional small-cap index funds.

Fundamental Rating Based on AI (1-10)

Rating: 7.5

Justification: SRLM receives a moderately high AI-based rating based on its strong track record of outperformance, experienced management team, and unique multi-manager approach. However, the ETF's relatively low market share, limited trading volume, and exposure to small-cap volatility warrant some caution.

Resources and Disclaimers

• Website: https://www.firsttrust.com/
• Prospectus: https://www.firsttrust.com/fund/35255g1076/etf-first-trust-multi-manager-small-cap-opportunities-etf

Disclaimer: This information is for educational purposes only and should not be considered as financial advice. Please consult a qualified financial professional before making any investment decisions.