Neither process nor people stand out at First Trust Alerian Dsrupt Tech RE ETF, but it gets enough right to help this strategy retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy earns an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in momentum exposure and quality exposure compared with category peers. Momentum is the premise that stocks that have recently outperformed will continue to do so. With low momentum exposure, the portfolio is holding stocks that managers believe to be undervalued. And a low quality exposure is rooted in stocks with higher financial leverage and lower profitability. 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

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Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. First Trust Alerian Dsrupt Tech RE ETF earns an Average Process Pillar rating. The primary contributor to the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The stability of the management team also bolsters the rating. Specifically, the fund has not seen a manager change in the last 11 years. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 29%. 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 relatively low 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 index called the Alerian Disruptive Technology Real Estate Index.  The fund will normally invest at least 90% of its net assets (plus any borrowings for investment purposes) in the common stocks, real estate investment trusts (“REITs”) and depository receipts that comprise the index. The index seeks to provide exposure to companies that own, operate and/or lease real estate that supports advanced wired and wireless communication, data storage and processing infrastructure, and e-commerce warehouses and fulfillment centers. 

 The portfolio has allocations in its top two sectors, real estate and communication services, that are similar to the category. The sectors with low exposure compared to category peers are basic materials and energy; however, the allocations are similar to the category. The portfolio is composed of 34 holdings and is relatively concentrated. In particular, 59.0% of the fund’s assets are housed within the top 10 holdings, compared with the category’s 36.5% average. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 39% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Average

Process

First Trust’s equity team is good but unexceptional, earning the strategy an Average People Pillar rating. There’s a deep bench of seven managers listed on the fund. Experience on the team is abundant, with 22 years of average portfolio management experience. Together, they manage a total of 108 strategies, with a Bronze asset-weighted average Morningstar Medalist Rating, indicating the potential 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.

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 Alerian Disruptive

DTRE tracks an index of real estate stocks that support wired and wireless communication, data infrastructure, warehouses, and fulfillment centers. Selection and weighting of securities are based on three-month average trading values.

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REIT index performance can be a leading indicator for the asset class as a whole. Our latest Asset Allocation recorded a strong quarter for listed real estate, showing signs of long-awaited resurgence. REITs send encouraging signals. A deeper analysis of sectoral returns since the Great Financial Crisis reveals no clear pattern, vindicating broad sectoral exposure.

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The history of construction spending since 1993 reveals that this data tends to weaken prior to recessions. For a recent dip in Residential Construction attributed to the rise in mortgage rates, this indicator is charging higher.

Construction Spending Rises

NAREIT has developed a financial metric called Funds From Operations, or FFO, that investors in REITs can use to better evaluate their financial performance. Dividend income plays a big role in why investors would seek to own stocks in REITs. What makes the FFO information valuable to investors is its correlation with the dividends paid out by REITs.

Connecting FFO To DPS For REITs

First Trust Eurozone AlphaDEX ETF

First Trust Germany AlphaDEX Fund

First Trust United Kingdom AlphaDEX Fund

LONDON--(BUSINESS WIRE)--First Trust Global Portfolios Management Limited (“FTGPM”) announces the declaration of the quarterly distributions for the following sub-funds of First Trust Global Funds plc, ISIN Fund Name Frequency Dividend per Share IE000C75IMX8 First Trust Alerian Disruptive Technology Real Estate UCITS ETF Class B Quarterly $0.0971 (USD) IE00BF2FL590 First Trust Eurozone AlphaDEX® UCITS ETF Class B Quarterly 0.

First Trust Global Portfolios Management Limited Announces Distributions for certain sub-funds of First Trust Global Funds plc

First Trust FTSE EPRA/NAREIT Developed Markets Real Estate

Another First Trust ETF is switching to VettaFi, bringing the total number of First Trust funds tracking the VettaFi family of indexes to six, representing more than $100 million in assets.

VettaFi Indexes Now Underpin 6 ETFs in the First Trust Fund Family

LOS ANGELES--(BUSINESS WIRE)--VettaFi announces further expansion of its relationship with asset manager First Trust, as another First Trust fund starts tracking a VettaFi index.

VettaFi Indexes Now Underpin Six ETFs in the First Trust Fund Family

News for First Trust Alerian Disruptive ETF (DTRE)