First Trust Dorsey Wright Focus 5 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 effective investment philosophy supports an Above 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 that are consistently profitable, growing, and have solid balance sheets. 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

First Trust NASDAQ-100 Technology Sector Index Fund

First Trust Industrials/Producer Durables AlphaDEX Fund

First Trust Nasdaq Semiconductor ETF

First Trust Dow Jones Internet Index Fund

First Trust Consumer Discretionary AlphaDEX Fund

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 Dorsey Wright Focus 5 ETF earns an Above Average Process Pillar rating. 

The most meaningful contributor to the rating is the fund's impressive long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category average, which suggests that the managers have shown skill in their allocation of risk. This fund tracks an index, which also increases its process rating. Historical data, such as 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 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.

 This strategy skews toward larger, more growth-oriented companies than its average peer in the Mid-Cap Blend Morningstar Category. Looking at additional factor exposure, this strategy has consistently tilted toward companies with relatively higher trading volumes in the last 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. This strategy also has had a defensive tilt, with exposure to higher-quality stocks compared with peers in recent years. This means that the fund holds companies that are profitable, growing, and have solid balance sheets. High exposure to the quality factor means holding companies that are consistently profitable, growing, and have solid balance sheets. Compared with category peers, the strategy also had more exposure to the Quality factor in the most recent month. In addition, this strategy has exhibited a tilt toward higher-volatility stocks in these years, meaning companies that have a higher historical standard deviation of returns compared with peers. This is a higher-risk, higher-reward approach. In this month, the strategy also had more exposure to the Volatility factor over 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 technology and communication services relative to the category average by 34.1 and 7.7 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and healthcare, underweight the average by 13.0 and 9.2 percentage points of assets, respectively. The strategy has only reported a handful of holdings, and is in a category where 15.4% of assets are typically concentrated in the top 10 holdings. And finally, in terms of portfolio turnover, looking at year-over-year movements, 103% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Above Average

Process

First Trust’s 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. The team is well equipped, with an average of 22 years of 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.

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 Dorsey Wright Focus 5 ETF

FV tracks an equal-weighted index of US and global ETFs issued by First Trust. The index selects 5 ETFs based on relative price momentum.

First Trust Dorsey Wright Focus 5 ETF is a fund-of-funds managed by First Trust that invests only in other First Trust ETFs. Here, I review the FV ETF and perform several comparisons to other ETFs commonly held by investors. Based on comparing the FV ETF against two index-based ETFs and then one momentum-investing ETF, I see little, if any, value in holding this ETF, thus my Sell rating.

FV: Examining The First Trust Dorsey Wright FOF ETF

iShares MSCI USA ESG Optimized ETF

iShares Nasdaq Biotechnology ETF

iShares S&P 100 ETF

iShares MSCI USA Quality Factor ETF

iShares PHLX Semiconductor ETF

Financial Select Sector SPDR Fund

Technology Select Sector SPDR Fund

SPDR SSGA U.S. Sector Rotation ETF

Even with $2.4 trillion in ETF assets spread across more than 400 ETFs, there's a pending offering from BlackRock that caught my eye. Before I lose you, dear reader, I'm not talking about the hopefully soon-to-be-approved iShares Bitcoin Trust.

A Pending BlackRock ETF to Watch

Avantis U.S. Small Cap Value ETF

YieldMax COIN Option Income Strategy ETF

Pacer US Cash Cows 100 ETF

SPDR S&P Global Natural Resources ETF

FlexShares Morningstar Global Upstream Natural Resources Index Fund

iShares Russell 1000 Value ETF

iShares Russell 1000 Growth ETF

JPMorgan Equity Premium Income ETF

iShares MSCI USA Momentum Factor ETF

Amplify Natural Resources Dividend Income ETF

YieldMax NVDA Option Income Strategy ETF

Invesco DWA Momentum ETF

Invesco S&P 500 Pure Growth ETF

Invesco S&P 500 Pure Value ETF

SPDR Portfolio S&P 500 Growth ETF

SPDR Portfolio S&P 500 Value ETF

T Rowe Price Blue Chip Growth ETF

First Trust NASDAQ Technology Dividend Index Fund

Yieldmax Tsla Option Income Etf

VictoryShares Free Cash Flow ETF

iShares MSCI USA Value Factor ETF

Vanguard Value ETF

Vanguard Growth ETF

Consumer Staples Select Sector SPDR Fund

Good Morning, VettaFi Voices! Growth has blown value out of the water in 2023. It's not even close. The Vanguard Value ETF (VTV) is up less than 1% year to date. Meanwhile, the Vanguard Growth ETF (VUG), the growth fund, is up 32%. That's a big difference, and clearly we're in a growth regime.

VettaFi Voices On: The Nature of Value

Global X Robotics & Artificial Intelligence ETF

iShares Robotics & Artificial Intelligence Multisector ETF

JPMorgan US Momentum Factor ETF

Direxion NASDAQ-100 Equal Weighted Index Shares

ValueShares U.S. Quantitative Value ETF

ROBO Global Robotics and Automation ETF

ALPS Sector Dividend Dogs ETF

Invesco S&P 500 Quality ETF

SPDR S&P Biotech ETF

Communication Services Select Sector SPDR Fund

This week, the VettaFi Voices gather around the water cooler and talk smart beta and equal weight ETFs.

VettaFi Voices On: Smart Beta and Equal-Weight ETFs

Passively-managed FV invests in the First Trust sector & industry ETFs that are on a tear, betting on price momentum to persist. The cornerstone of its strategy is Dorsey, Wright & Associates' proprietary relative strength score.

FV: Otherwise Strong Strategy, Yet Mixed Returns, Burdensome Fees

iShares MSCI Chile ETF

First Trust Natural Gas ETF

Franklin FTSE Brazil ETF

AdvisorShares Pure US Cannabis ETF

Simplify Interest Rate Hedge ETF

Invesco Golden Dragon China ETF

Pacer Trendpilot US Large Cap ETF

Invesco Dynamic Energy Exploration & Production ETF

FolioBeyond Rising Rates ETF

Schwab Intermediate-Term US Treasury ETF

iShares MSCI Turkey ETF

Sprott Uranium Miners ETF

Despite a positive start early on, stock and bond markets ended August deep in the red. The search for best ETFs is on.

What Investors Rattled By August Selling Should Do Now

First Trust Nasdaq Transportation ETF

Sector rotation, the act of moving in and out of various based on economic climate or market setting, is undeniably made easier with sector exchange traded funds. “For investors looking to take a more active approach to stock diversification—that is, beyond a broad-based index fund—a so-called sector rotation strategy is one way to go,” according [.

An Easy to Implement Sector Rotation Strategy

First Trust Dorsey Wright International Focus 5 ETF

Vanguard High Dividend Yield ETF

First Trust NASDAQ Cybersecurity ETF

iShares Core S&P Total U.S. Stock Market ETF

February is not known for good stock returns. However, this year could be different as global economies and corporates will strive hard to register a fast rebound from the COVID-19 slump.

News for First Trust Dorsey Wright Focus 5 ETF ETF (FV)