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Is First Trust RBA American Industrial Renaissance ETF (AIRR) a Strong ETF Right Now?

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A smart beta exchange traded fund, the First Trust RBA American Industrial Renaissance ETF (AIRR - Free Report) debuted on 03/10/2014, and offers broad exposure to the Industrials ETFs category of the market.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

Because the fund has amassed over $203.61 million, this makes it one of the average sized ETFs in the Industrials ETFs. AIRR is managed by First Trust Advisors. Before fees and expenses, AIRR seeks to match the performance of the Richard Bernstein Advisors American Industrial Renaissance Index.

The Richard Bernstein Advisors American Industrial Renaissance Index is measures the performance of small and mid cap US companies in the industrial and community banking sectors.

Cost & Other Expenses

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Annual operating expenses for AIRR are 0.70%, which makes it one of the most expensive products in the space.

The fund has a 12-month trailing dividend yield of 0.05%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

Representing 89.10% of the portfolio, the fund has heaviest allocation to the Industrials sector; Financials and Energy round out the top three.

When you look at individual holdings, Spx Corporation (SPXC - Free Report) accounts for about 3.82% of the fund's total assets, followed by Astec Industries, Inc. (ASTE - Free Report) and Federal Signal Corporation (FSS - Free Report) .

The top 10 holdings account for about 33% of total assets under management.

Performance and Risk

So far this year, AIRR has lost about -0.12%, and it's up approximately 7.58% in the last one year (as of 08/17/2022). During this past 52-week period, the fund has traded between $36.26 and $47.78.

AIRR has a beta of 1.24 and standard deviation of 32.97% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 56 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust RBA American Industrial Renaissance ETF is a reasonable option for investors seeking to outperform the Industrials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

Vanguard Industrials ETF (VIS - Free Report) tracks MSCI US Investable Market Industrials 25/50 Index and the Industrial Select Sector SPDR ETF (XLI - Free Report) tracks Industrial Select Sector Index. Vanguard Industrials ETF has $3.78 billion in assets, Industrial Select Sector SPDR ETF has $14.53 billion. VIS has an expense ratio of 0.10% and XLI charges 0.10%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Industrials ETFs.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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