First Trust STOXX® European Sel Div ETF's Average People Pillar and Process Pillar ratings result in a Morningstar Medalist Rating of Neutral. The portfolio maintains a cost advantage over competitors, priced within the second-lowest fee quintile among peers.  

 The strategy’s management team earns an Average People Pillar rating. The strategy earns an Average Process Pillar rating.  High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a high yield exposure is rooted in holding high dividend-paying or buyback stocks. 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

NatWest Group plc 

Rio Tinto plc Sponsored

NextNav

PlayAGS

SPDR Bloomberg Barclays Mortgage Backed Bond ETF

ProShares UltraShort 7-10 Year Treasury

Arcosa Inc

Ormat Technologies

Seritage Growth Properties

Autoliv

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 STOXX® European Select DivFd 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. The process is limited by the fund's unimpressive long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period.

 This strategy tends to hold smaller, deeper value companies than its average peer in the Europe Stock Morningstar Category. Analyzing additional factors, this fund has constantly tilted toward stocks with higher trading volumes than its Morningstar Category Peers over the past few years. This gives the managers more flexibility during bear markets to sell without adversely affecting prices. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. The managers have also tended to overweight yield during recent years, shown by the portfolio's high exposure to dividends or buybacks. Higher-yield stocks can provide steady income, but also have their risks. Dividend payers may cut payouts, for instance, if their earnings fall. Compared with category peers, the strategy also had more exposure to the Yield factor in the most recent month. In addition, this strategy has not maintained a defensive tilt, demonstrated by low exposure to the quality factor. This means the fund avoids holding firms that are consistently profitable, growing, and have solid balance sheets. Such positions do not tend to provide much ballast for a portfolio. In recent months, the strategy also had less Quality factor exposure than its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in financial services and basic materials relative to the category average by 12.0 and 10.5 percentage points, respectively. The sectors with low exposure compared to category peers are healthcare and technology, underweight the average by 12.1 and 11.4 percentage points of assets, respectively. The strategy owns 34 securities and is relatively top-heavy. Of the strategy's assets, 42.5% are concentrated within the top 10 holdings, compared to the typical peer's 21.8%. And finally, in terms of portfolio turnover, on a year-over-year basis, 49% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Average

Process

First Trust’s equity team is valuable but does not stand out as one of the industry's best, warranting 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. This group has had relatively low management turnover, providing a stable environment and continuity for the strategies. 

 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 STOXX European Select Dividend Index Fund

FDD tracks a dividend-weighted index of 30 high-dividend-yielding stocks selected from the STOXX Europe 600 Index.

JPMorgan BetaBuilders Europe ETF

Global X DAX Germany ETF

Xtrackers MSCI Europe Hedged Equity ETF

Xtrackers MSCI Eurozone Hedged Equity ETF

WisdomTree Europe SmallCap Dividend Fund

WisdomTree Europe Quality Dividend Growth Fund

ProShares MSCI Europe Dividend Growers ETF

Direxion Daily FTSE Europe Bull 3X Shares

WisdomTree Europe Hedged SmallCap Equity Fund

iShares MSCI Germany ETF

iShares MSCI France ETF

iShares MSCI Eurozone ETF

First Trust Europe AlphaDEX Fund

First Trust Eurozone AlphaDEX ETF

SPDR EURO STOXX 50 ETF

First Trust Germany AlphaDEX Fund

Franklin FTSE Europe ETF

Franklin FTSE Eurozone ETF

Franklin FTSE France ETF

Franklin FTSE Germany ETF

First Trust IPOX Europe Equity Opportunities ETF

Goldman Sachs ActiveBeta Europe Equity ETF

WisdomTree Europe Hedged Equity Fund

iShares Currency Hedged MSCI Germany ETF

iShares Currency Hedged MSCI Eurozone ETF

iShares Core MSCI Europe ETF

iShares MSCI Europe Small-Cap ETF

iShares Europe ETF

ALPS O'Shares Europe Quality Dividend ETF Shares

Pacer Trendpilot European Index ETF

First Trust RiverFront Dynamic Europe ETF

SPDR Portfolio Europe ETF

Vanguard FTSE Europe ETF

Business activity in the euro area came close to stabilising in March, as provisional PMI® survey data registered only a marginal decline in output of goods and services.

Eurozone Flash PMI Shows Economy Close To Stabilising In March, Price Pressures Ease

The eurozone escaped a technical recession, and a number of indicators suggest the economy is now bottoming out. The ECB is expected to cut rates from June onwards, but more cautiously than the market is currently anticipating.

The Eurozone Economy Is Bottoming Out

The flash estimate shows a decline in eurozone HICP inflation from 2.9% to 2.8% in January, with core inflation declining to 3.3% from 3.4% in December. However, it's too soon to declare victory in the inflation battle. As industry and retail are still struggling with excess inventories, non-energy industrial goods price inflation continues to fall and now stands at 2%.

Eurozone Headline Inflation Falls, But 'Core' Disappoints

Xtrackers MSCI Germany Hedged Equity ETF

iShares MSCI Germany Small Cap ETF

German Inflation Drops To Its Lowest Level Since June 2021

iShares MSCI Europe Financials ETF

The European Central Bank left interest rates unchanged, without conveying any urgency to start cutting rates in the next few months. It seems most likely that June or July would be the preferred time to start cutting rates.

ECB In Little Rush To Cut Rates

Business activity in the euro area fell at the slowest rate for six months in January, according to provisional PMI survey data. The PMI in fact suggests that the Eurozone is enduring its deepest contraction since 2013 (if early pandemic months are excluded), albeit with recent months hinting at a bottoming out of the downturn.

Eurozone Prices Rise At Increased Rate At Start Of 2024 As Downturn Moderates

Insurers likely face a very different investment regime today than they have in the past, with higher and more volatile interest rates as well as structurally higher inflation.

Brave New World: 2024 European Insurance Outlook

Europe managed to avoid an energy crisis despite the Ukraine war, with inflation under control and interest rates peaking. The European Central Bank is expected to lead interest rate cuts, followed by the Bank of England and Scandinavian central banks.

Europe: Big Changes Coming, Good Time To Diversify One's Portfolio

The first question for next week's European Central Bank meeting is how the Bank will react to current market pricing. The second, however, is why should the ECB react to current market pricing.

ECB Preview: Resisting The Pushback

Like their peers in the US, European stocks enjoyed quite a rally over the last two months of the year. In early December the STOXX 600 broke out above the resistance of the summer highs, and while momentum has slowed in the last couple of weeks, earlier this week the index experienced a golden cross.

European Golden Cross

The European Central Bank (ECB) kept its key policy rates on hold today for the second consecutive meeting. The interest rate on the main refinancing operations, the marginal lending facility, and the deposit facility remain at 4.5%, 4.75% and 4.0%, respectively.

December ECB Meeting: A More Hawkish Stance Than The Fed

The ECB will almost surely keep rates on hold at the December meeting. The question is to what extent it will align with the market's aggressive pricing for rate cuts in 2024.

December's ECB Cheat Sheet: A Reality Check For Ultra-Dovish Expectations

The ECB hike cycle seems over, but the shockwaves of tightening will still shape the eurozone economy in 2024. Traditional lags in transmission are now accompanied by longer ones in average interest burden increases, potentially extending the impact of tightening.

2024 Set To Be The Year That The ECB Hike Cycle Is Felt

Next week's challenge for the European Central Bank is how to keep all options open without sounding too dovish but also not too detached from reality. The weak macro economic backdrop no longer justifies rate hikes, even for the hawks.

ECB Preview: The Long Dovish Shift

Slowing inflation, a cooling labour market, and lower expected corporate revenues make a peak in wage growth before the middle of next year likely. While the European Central Bank waits for clarity, this should open the door to earlier rate cuts than currently expected.

Eurozone Wage Growth Is Set To Peak Soon

After hitting a new all-time high in February, the FTSE has struggled to find any sustainable support, hurt by concerns over China, the UK's struggling economy, and high interest rates across the world. We have had some positive data out of China, the UK, and the US this week, which may mean the worst days are behind us.

FTSE Lags EU And U.S. Markets, But Time For Catch Up With Global Indices?

Real GDP growth was minus one percent for the third quarter, while the PMI Index, a measure of economic health, has been in contractionary territory since the middle of this summer. Draghi's concerns about the Eurozone's economic prospects center on the fear that the region is falling further behind both the US and China in terms of global competitiveness.

Europe's Ongoing Malaise

Rising wages and higher incomes are boosting Europe's economic recovery, but policymakers may face challenges due to population aging and shrinking workforce. Demographics and shorter working weeks mean employers face fierce competition to find qualified workers and must pay more to retain them.

Europe's Wage Rises Are Aiding Recovery But Economies Face Risks

Eurozone growth turned negative in the third quarter and the next two quarters don't look very promising either. With inflation declining, the case for an additional rate hike is disappearing.

The Eurozone Is Flirting With Recession

Businesses report a slight tick-up in selling price expectations, but hard data still looks benign. Decline in the Economic Sentiment Indicator in October came as no surprise after the PMI had already dropped further into contraction territory.

Eurozone Economy Braces Itself For Prolonged Sluggishness

The European Central Bank increasingly seems to embrace the idea that the peak in policy rates has already been reached. After 10 consecutive hikes, the ECB's decision to leave policy rates unchanged should have been an easy one.

ECB: A Dovish Pause Now, A Peak Soon

With the exception of a brief period of growth during the opening quarter of 2023, euro area manufacturing output has decreased continuously since the middle of 2022. The downturn in new orders and the accelerated depletion of backlogs of orders prompted firms to reduce employment for the first time since January 2021.

Rising Recession Risks As Eurozone Flash PMI Falls In October, Price Pressures Ease Further

If anything, developments since the September meeting have made it even easier for the European Central Bank to pause at its next meeting. As much as the ECB has tried to keep the door to further rate hikes open since the September decision, recent developments have clearly complicated this position.

ECB Preview: The Best Moment To Pause

Tighter monetary policy is starting to work. Alternatives would be more costly. So far, so good. These words are probably a fair assessment of Europe's progress thus far in its struggle against inflation.

Europe Must Succeed In Restoring Price Stability

Eurozone business activity remained in contraction at the end of the third quarter of the year, as an increased rate of loss of orders led to a further decline in activity. The overall reduction in output was again led by manufacturing, but the service sector saw activity decrease for the second month running.

News for First Trust STOXX European Select Dividend Index Fund ETF (FDD)