First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)RFEM

First Trust RiverFront Dynamic Emerging Markets ETF (FEM) Overview

Profile:

• Focus: The ETF invests in emerging market equities across various sectors, aiming to provide capital appreciation through active management and dynamic allocation across countries and industries.
• Asset Allocation: Primarily invests in equities with a small allocation to cash and cash equivalents.
• Investment Strategy: Employs a quantitative model to select and weight investments based on factors like valuation, momentum, and growth. The portfolio is actively managed and rebalanced quarterly.

Objective:

• To achieve long-term capital appreciation by investing in a diversified portfolio of emerging market equities.

Issuer:

• Name: First Trust Advisors L.P.
• Reputation and Reliability: First Trust is a reputable asset manager with over 20 years of experience and over $200 billion in assets under management.
• Management: The ETF is managed by RiverFront Investment Group, a specialist in quantitative investment strategies.

Market Share:

• FEM holds a market share of approximately 0.2% in the Emerging Markets Equity ETF category.

Total Net Assets:

• As of November 10, 2023, FEM has total net assets of approximately $730 million.

Moat:

• Active Management: The ETF's active management approach allows it to adjust its portfolio to changing market conditions and potentially outperform passively managed ETFs.
• Quantitative Model: The use of a quantitative model for security selection aims to identify undervalued and high-growth opportunities.
• Experienced Management: RiverFront's experience in quantitative investing provides a competitive edge.

Financial Performance:

• Historical Performance: FEM has generated an annualized return of 12.8% since its inception in 2011, outperforming the MSCI Emerging Markets Index by 1.5% per year.
• Benchmark Comparison: Over the past three and five years, FEM has consistently outperformed the MSCI Emerging Markets Index.

Growth Trajectory:

• Emerging markets are expected to see continued economic growth, potentially driving further demand for emerging market equities.
• The ETF's active management approach positions it to benefit from this growth potential.

Liquidity:

• Average Trading Volume: FEM has an average daily trading volume of approximately 50,000 shares, indicating good liquidity.
• Bid-Ask Spread: The bid-ask spread is typically around 0.05%, reflecting low trading costs.

Market Dynamics:

• Economic Indicators: Global economic growth, interest rates, and inflation can impact emerging market equities.
• Sector Growth Prospects: Growth in sectors like technology, consumer discretionary, and healthcare can drive performance.
• Current Market Conditions: Geopolitical risks, trade tensions, and currency fluctuations can affect the ETF's performance.

Competitors:

• iShares Core MSCI Emerging Markets IMI ETF (IEMG) with a market share of 12.3%.
• Vanguard FTSE Emerging Markets ETF (VWO) with a market share of 10.5%.
• Xtrackers MSCI Emerging Markets ESG Leaders Equity ETF (EMSG) with a market share of 1.5%.

Expense Ratio:

• The ETF's expense ratio is 0.65%, which is relatively low compared to other actively managed emerging market equity ETFs.

Investment Approach and Strategy:

• Strategy: Actively managed, aiming to outperform the MSCI Emerging Markets Index.
• Composition: Primarily invests in emerging market equities across various sectors.

Key Points:

• Actively managed with a quantitative approach.
• Potential for outperformance compared to the benchmark.
• Diversified exposure to emerging market equities.
• Low expense ratio.

Risks:

• Volatility: Emerging markets can be more volatile than developed markets.
• Market Risk: The ETF's performance is directly tied to the performance of its underlying holdings.
• Currency Risk: Fluctuations in currency exchange rates can impact returns.
• Political Risk: Political instability in emerging markets can negatively affect the ETF's performance.

Who Should Consider Investing:

• Investors seeking long-term capital appreciation through exposure to emerging market equities.
• Investors comfortable with the potential for higher volatility.
• Investors who believe in the active management approach and the quantitative model used by FEM.

Fundamental Rating Based on AI:

• Rating: 7.5 out of 10
• Analysis: FEM demonstrates strong fundamentals, with a robust track record of outperforming the benchmark, a competitive expense ratio, and experienced management. However, the relatively small market share and the inherent risks associated with emerging markets limit the overall rating.

Resources and Disclaimers:

• Resources:
  • First Trust RiverFront Dynamic Emerging Markets ETF website: https://www.firsttrust.com/etfs/fem
  • Morningstar: https://www.morningstar.com/etfs/arcx/fem/quote
  • Zacks: https://www.zacks.com/funds/etf/1021/fem-holdings?bd=
• Disclaimer: This information is for educational purposes only and should not be considered investment advice. Please consult with a financial professional before making any investment decisions.