First Trust S-Network Fut Vhcl&Tech ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Bronze. The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.  

 The strategy's investment process inspires confidence and earns an Above Average Process Pillar rating, the result of a recent pillar upgrade from Average. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in volatility exposure and an underweight in momentum exposure compared with category peers. High volatility exposure is attributed to companies with a higher standard deviation of returns. And low momentum exposure is rooted in holding stocks that are not currently on a winning streak and instead holding those that managers believe are undervalued. The strategy’s management team earns an Average People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Microsoft

Advanced Micro Devices

Apple

NVIDIA

Alphabet

Tesla

Intel

QUALCOMM

Texas Instruments

Suncor Energy

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. First Trust S-Network Fut Vhcl&Tech ETF earns an Above Average Process Pillar rating. The leading factor in the rating is the fund's strong long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category average, which suggests that the process was successful over that period. This fund tracks an index, which also increases its process rating. Historical data, like Morningstar's Active/Passive Barometer, shows that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 33%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's modest success ratio suggests that the firm could do better across its fund lineup.

The investment strategy as stated in the fund's prospectus is:  The investment seeks investment results that correspond generally to the price and yield (before the fund’s fees and expenses) of an equity index called the S-Network Electric & Future Vehicle Ecosystem Index.  The fund will normally invest at least 90% of its net assets in the common stocks and depositary receipts that comprise the index. To be eligible for inclusion in the index and a company must be listed on a major recognized stock exchange and engaged in one of the following sectors: electric and autonomous vehicle manufacturing; enabling technologies or enabling materials. The fund is non-diversified. 

 The portfolio is overweight in technology and basic materials relative to the category average by 52.9 and 5.2 percentage points, respectively. The sectors with low exposure compared to category peers are consumer cyclical and consumer defensive, underweight the average by 55.6 and 4.7 percentage points of assets, respectively. The portfolio is positioned across 106 holdings and is diversified among those holdings. In its most recent portfolio, 43.1% of the portfolio's assets were concentrated in the top 10 fund holdings, compared to the category’s 48.6% average.

Above Average

Process

First Trust’s team is valuable but does not stand out as one of the industry's best, warranting an Average People Pillar rating. There’s a sizable bench of seven managers listed on the fund. Experience on the team is abundant, with 19 years of average portfolio management experience. Together, they manage a total of 106 strategies, with solid long-term prospects. The strategies average a Bronze asset-weighted Morningstar Medalist Rating, indicating a position to deliver positive alpha relative to the category median in aggregate. This group has been working together for a while and has been successful in retaining talent compared to peers, with no departures in the last five years.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

Average

People

First Trust meets the industry standard for stewardship, but it could do more to align itself with investors. It earns an Average Parent rating.

This is a team-oriented organization that eschews star managers. While exchange-traded funds represent the bulk of the firm's assets, First Trust bypasses the competitive market for low-cost beta funds, instead opting for complex strategies with higher management fees. However, the firm's focus on ETFs for future product development underpins its commitment to tax efficiency and transparency. Some of its thematic strategies appear trendy, but it stands behind them and rarely liquidates funds. 

The firm is a private partnership, controlled by Jim Bowen, the CEO. Many senior managers are limited partners. This ownership structure helps the firm stay focused on the long term and promotes retention, which has been strong for the investment team. The firm has grown considerably over the past decade and is among the largest providers of actively managed ETFs, as well as unit investment trusts. As it has grown, the firm has expanded its investment team and beefed up its technology infrastructure.

First Trust's focus is on educating advisors and providing them solutions. This may benefit investors indirectly, but First Trust could do more to directly align with investors by cutting fees and limiting trendy strategies.

Parent

First Trust NASDAQ Global Auto Index Fund

CARZ tracks an index that provides exposure to electric and autonomous vehicles and the technology essential for the supply and production of these vehicles. Securities are selected and weighted by market-cap.

WHEATON, Ill.--(BUSINESS WIRE)--First Trust NASDAQ Global Auto Index Fund (Nasdaq: CARZ) (the “Fund”), an exchange-traded index fund and a series of First Trust Exchange-Traded Fund II (the “Trust”), previously announced changes to its investment objective and the Fund's name. Effective January 26, 2022, the Fund will seek investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an index called the S-Network Electric & Future Vehicle Ecosy

First Trust NASDAQ Global Auto Index Fund Announces Timing of Changes to Investment Objective and Fund Name

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News for First Trust NASDAQ Global Auto Index Fund ETF (CARZ)