Weakness in First Trust Hrzn MgdVolatil Dev Intl ETF's Process and People Pillar ratings limits this strategy to a Morningstar Medalist Rating of Negative. The portfolio maintains a cost advantage over competitors, priced within the second-lowest fee quintile among peers.  

 The strategy gets a Low Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in liquidity exposure and volatility exposure compared with category peers. Low liquidity risk exposure is attributed to stocks with a low trading volume, limiting managers' flexibility. And low volatility exposure is rooted in stocks that have a lower standard deviation of returns. The strategy benefits from its portfolio management team's experience. Despite this, other weaknesses drive the strategy's Low People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

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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 Hrzn MgdVolatil Dev Intl ETF earns a Low Process Pillar rating. 

The predominant detractor from the rating is the fund's weak 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. The parent firm's disappointing risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 2.7 stars, also limits the process. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis. The parent firm's five-year retention rate of 67% weakens the process further.

 This strategy tends to hold smaller, higher-growth companies than its average peer in the Foreign Large Value Morningstar Category. Analyzing additional factors, this strategy consistently held some companies with relatively lower trading volume compared with Morningstar Category peers in the last few years. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. In the latest month, the strategy was also less exposed to the Liquidity factor compared with Morningstar Category peers. This strategy has also tilted toward low-volatility stocks in recent years, meaning those that have a lower standard deviation of returns. Such holdings can limit a strategy's downside, but cause it to lag in bull markets. Similarly, in recent months, the strategy also had less exposure to the Volatility factor than peers. Additionally, this strategy has had lower yield exposure than peers, with the portfolio holding fewer stocks with high dividend or buyback yields over these years. Its preference for stocks with lower yields may well lead to a growthier portfolio. However, growth stocks court additional risks if their forecasts do not come to fruition and are often more volatile than companies with stable dividends. In recent months, the strategy also had less Yield 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 consumer defensive and communication services relative to the category average by 9.0 and 8.2 percentage points, respectively. The sectors with low exposure compared to category peers are energy and basic materials, underweight the average by 8.2 and 4.7 percentage points of assets, respectively. The portfolio is composed of 182 holdings and is relatively top-heavy. Of the strategy's assets, 16.3% are concentrated within the top 10 holdings, as opposed to the category’s 13.9% average. And finally, in terms of portfolio turnover, on a year-over-year basis, 80% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Process

First Trust Hrzn MgdVolatil Dev Intl ETF earns a Low People Pillar rating. The number one detractor from the rating is its parent firm's disappointing risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 2.7 stars. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis. The combined average five-year excess return of each manager also weakens the team. It suggests that the funds they manage have underperformed their respective category's average return. The parent firm's five-year retention rate of 67% weakens the team further.


Scott E. Ladner, the longest-tenured manager on the strategy, boasts 15 years of listed portfolio management experience. The strategies they currently manage have an average Morningstar Rating of 2.8 stars, demonstrating disappointing risk-adjusted performance compared with category peers. Scott E. Ladner has an experienced backdrop of support. The three listed managers boast 10 years of average listed portfolio management experience. The highest personal investment by any of the strategy's managers is less than $10,000. That is too low to promote alignment of their interests with the fund's investors.

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.

Average

Parent

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WHEATON, Ill.--(BUSINESS WIRE)--First Trust Advisors L.P. ("FTA") announces the declaration of distributions for 133 exchange-traded fund(s) (each a “Fund,” collectively, the “Funds”) advised by FTA. The following dates apply to today's distribution declarations: Expected Ex-Dividend Date: March 21, 2024 Record Date: March 22, 2024 Payable Date: March 28, 2024 Ticker Exchange Fund Name Frequency Ordinary Income Per Share Amount ACTIVELY MANAGED EXCHANGE-TRADED FUNDS   First Trust Exchange-Trade.

First Trust Advisors L.P. Announces Distributions for Exchange-Traded Funds

WHEATON, Ill.--(BUSINESS WIRE)--First Trust Advisors L.P. (“FTA”) announced today that shareholders of First Trust Horizon Managed Volatility Developed International ETF (NYSE Arca: HDMV) (the “Fund”), a series of First Trust Exchange-Traded Fund III (the “Trust”), voted to approve a new investment sub-advisory agreement with Horizon Investments, LLC (“Horizon”). ACP Horizon Holdings, L.P., an entity affiliated with Altamont Capital Partners, a private investment firm located in Palo Alto, Cali

First Trust Announces Shareholder Approval of the New Investment Sub-Advisory Agreement for First Trust Horizon Managed Volatility Developed International ETF

WHEATON, Ill.--(BUSINESS WIRE)--First Trust Advisors L.P. (“FTA”) announced today that shareholders of First Trust Horizon Managed Volatility Domestic ETF (NYSE Arca: HUSV), a series of First Trust Exchange-Traded Fund III (the “Trust”), voted to approve a new investment sub-advisory agreement with Horizon Investments, LLC (“Horizon”). FTA also announced today that the special shareholder meeting for First Trust Horizon Managed Volatility Developed International ETF (NYSE Arca: HDMV), also a se

First Trust Announces Shareholder Approval of the New Sub-Advisory Agreement for First Trust Horizon Managed Volatility Domestic ETF and Adjournment of Special Shareholder Meeting for First Trust Horizon Managed Volatility Developed International ETF

WHEATON, Ill.--(BUSINESS WIRE)--First Trust Advisors L.P. (“FTA”) announced today that the special shareholder meeting for First Trust Horizon Managed Volatility Domestic ETF (NYSE Arca: HUSV) and First Trust Horizon Managed Volatility Developed International ETF (NYSE Arca: HDMV), both series of First Trust Exchange-Traded Fund III (the “Trust”), has been adjourned in order to allow shareholders additional time to vote to approve a new Investment Sub-Advisory Agreement for each of HUSV and HDM

First Trust Announces Adjournment of Special Shareholder Meeting for First Trust Horizon Managed Volatility Domestic ETF and First Trust Horizon Managed Volatility Developed International ETF

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News for First Trust Horizon Managed Volatility Developed Intl ETF ETF (HDMV)