Weakness in First Trust RiverFront Dyn Dev Intl ETF's People and Process Pillar ratings limits this strategy to a Morningstar Medalist Rating of Negative. The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.  

 A recent bout of personnel turnover and other weaknesses drive the strategy's Low People Pillar. The strategy earns a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a considerable overweight position in quality exposure and has an overweight in volatility exposure compared with category peers. High quality exposure is attributed to stocks with low financial leverage and strong returns on equity. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. 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.

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 RiverFront Dyn Dev Intl ETF earns a Below Average Process Pillar rating. 

The process is strengthened by the experience of the management team, which averages 23 years at this fund. However, the rating is weakened 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 parent firm's disappointing risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 2.7 stars, also detracts from the process. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

 This strategy prefers smaller market-cap companies compared with the average fund in its peer group, the Foreign Large Blend Morningstar Category.  But in terms of investment style, it is on par with peers. Examining additional factor exposure, this strategy has consistently had a defensive tilt owing to its exposure to high-quality stocks over the past few years. High exposure to the quality factor means holding companies that are consistently profitable, growing, and have solid balance sheets. In recent months, the strategy was more exposed to the Quality factor compared with its Morningstar Category peers as well. This strategy also has had an overweight bias to the volatility factor over these years, meaning it has owned companies that have a higher historical standard deviation of returns. Such stocks tend to rise faster and fall harder than the broad market. High-volatility exposure contributes to stronger performance during bull markets, but often at the cost of losing more during downturns. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. Additionally, this strategy has demonstrated a preference for high-momentum stocks in these years. Momentum strategies wager that market outperformers will continue to outperform, and laggards will continue to lag. Higher exposure to the former could mean the managers are overweighting stocks on winning streaks. In this month, the strategy also had more exposure to the Momentum 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 real estate and communication services relative to the category average by 3.6 and 3.5 percentage points, respectively. The sectors with low exposure compared to category peers are technology and industrials, underweight the average by 5.3 and 4.7 percentage points of assets, respectively. The strategy owns 188 securities and is similarly diversified as peers, with 15.0% of portfolio assets concentrated within the top 10 holdings. And finally, in terms of portfolio turnover, on a year-over-year basis, 81% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Below Average

Process

First Trust RiverFront Dyn Dev Intl ETF earns a Low People Pillar rating. The largest detractor from the rating is the parent firm's five-year success ratio of 39%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median return for the period. The parent's subpar success ratio suggests that the firm could do better across its fund lineup. The instability of its management team also holds the rating back. The fund last saw a manager change two months ago. The parent firm's five-year retention rate of 67% detracts from the rating further.


Chris Konstantinos’s veteran status, with 23 years of listed portfolio management experience, brings a wealth of experience to the table. The average Morningstar Rating of the strategies they currently manage is 2.3 stars, demonstrating underwhelming risk-adjusted performance. Chris Konstantinos has an experienced listed co-manager. Together, they average 23 years of listed portfolio management experience.

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

First Trust RiverFront Dynamic Developed International ETF

RFDI is an actively-managed fund that seeks capital appreciation from developed-country stocks (excluding the US) selected using a factor approach. The manager has discretion to currency-hedge up to 100% of the portfolio.

First Trust RiverFront Dynamic Asia Pacific ETF

WHEATON, Ill.--(BUSINESS WIRE)--First Trust Advisors L.P. (“FTA”) announced today that the reorganization of First Trust RiverFront Dynamic Asia Pacific ETF (Nasdaq: RFAP), an actively managed exchange-traded fund (“ETF”), managed by FTA and sub-advised by RiverFront Investment Group LLC (“RiverFront”), into First Trust RiverFront Dynamic Developed International ETF (Nasdaq: RFDI), another actively managed ETF managed by FTA and sub-advised by RiverFront, was completed prior to the open of the

First Trust Announces Completion of First Trust RiverFront Dynamic Asia Pacific ETF's Reorganization into First Trust RiverFront Dynamic Developed International ETF

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WHEATON, Ill.--(BUSINESS WIRE)--First Trust Advisors L.P. (“FTA”) announced today that the Board of Trustees of First Trust RiverFront Dynamic Asia Pacific ETF (Nasdaq: RFAP), an actively managed exchange-traded fund (“ETF”) managed by FTA and sub-advised by RiverFront Investment Group LLC (“RiverFront”), approved the reorganization of RFAP into First Trust RiverFront Dynamic Developed International ETF (Nasdaq: RFDI), another actively managed ETF managed by FTA and sub-advised by RiverFront. T

First Trust Board Approves Reorganization of First Trust RiverFront Dynamic Asia Pacific ETF into RiverFront Dynamic Developed International ETF

News for First Trust RiverFront Dynamic Developed International ETF ETF (RFDI)