First Trust Nasdaq Lux Dgtl Hlth SoluETF's Average Process Pillar and People Pillar ratings result in a Morningstar Medalist Rating of Neutral. The portfolio maintains a cost advantage over competitors, priced within the second-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 a significant overweight position in liquidity exposure and quality exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a high quality exposure is rooted in holding stocks with low financial leverage and strong returns on equity. 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.

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Insulet

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 Nasdaq Lux Dgtl Hlth SoluETF earns an Average Process Pillar rating. The predominant 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. Management team experience, which averages 22 years at this fund, also supports the process. 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 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 results that correspond generally to the price and yield of an equity index called the Nasdaq Lux Health Tech Index TM (the “index”).  The fund will normally invest at least 80% of its net assets (plus any borrowings for investment purposes) in the common stocks and depositary receipts that comprise the index. The index is designed to measure the performance of a selection of companies that are primarily engaged in and involved at the intersection of healthcare and technology and as classified by Lux Capital based on analysis of the products and services offered by those companies. The fund is non-diversified. 

 The portfolio has allocations in its top two sectors, consumer defensive and financial services, that are similar to the category. The sectors with low exposure compared to category peers are healthcare and basic materials; however, the allocations are similar to the category. The strategy owns 41 securities and is relatively concentrated. Specifically, 64.0% of the strategy's assets are housed within the top 10 holdings, as opposed to the typical peer's 38.7%. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 18% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Average

Process

First Trust’s  team is comparable to peers, resulting in 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, demonstrating their potential to deliver positive alpha relative to the category median in aggregate.  

 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 Nasdaq Lux Digital Health Solutions ETF

EKG tracks a market cap-weighted index of globally-listed companies engaged in digital health technologies.

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WHEATON, Ill.--(BUSINESS WIRE)--First Trust Advisors L.P. (“First Trust”), a leading exchange-traded fund (“ETF”) provider and asset manager, announced today that it has launched a new ETF, the First Trust Nasdaq Lux Digital Health Solutions ETF (Nasdaq: EKG) (the “fund”). The fund seeks investment results that correspond generally to the price and yield (before the fund's fees and expenses) of an index called the Nasdaq Lux Health Tech Index (the “index”), which provides exposure to companies

News for First Trust Nasdaq Lux Digital Health Solutions ETF ETF (EKG)