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Should You Invest in the First Trust RBA American Industrial Renaissance ETF (AIRR)?

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If you're interested in broad exposure to the Industrials - Broad segment of the equity market, look no further than the First Trust RBA American Industrial Renaissance ETF (AIRR - Free Report) , a passively managed exchange traded fund launched on 03/10/2014.

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Industrials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 6, placing it in top 38%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $200.59 million, making it one of the average sized ETFs attempting to match the performance of the Industrials - Broad segment of the equity market. AIRR seeks to match the performance of the Richard Bernstein Advisors American Industrial Renaissance Index before fees and expenses.

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.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.70%, making it one of the more expensive products in the space.

It has a 12-month trailing dividend yield of 0.09%.

Sector Exposure and Top Holdings

ETFs offer a 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.

This ETF has heaviest allocation in the Industrials sector--about 87.90% of the portfolio. Financials and Consumer Discretionary round out the top three.

Looking at individual holdings, Rbc Bearings Incorporated (ROLL - Free Report) accounts for about 3.08% of total assets, followed by Astec Industries, Inc. (ASTE - Free Report) and Hubbell Incorporated (HUBB - Free Report) .

The top 10 holdings account for about 30.27% of total assets under management.

Performance and Risk

Year-to-date, the First Trust RBA American Industrial Renaissance ETF return is roughly 25.58% so far, and is up about 104.44% over the last 12 months (as of 04/27/2021). AIRR has traded between $19.19 and $42.46 in this past 52-week period.

The ETF has a beta of 1.32 and standard deviation of 31.75% for the trailing three-year period, making it a high risk choice in the space. With about 60 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust RBA American Industrial Renaissance ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, AIRR is a sufficient option for those seeking exposure to the Industrials ETFs area of the market. Investors might also want to consider some other ETF options in the space.

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 $5.02 billion in assets, Industrial Select Sector SPDR ETF has $20.70 billion. VIS has an expense ratio of 0.10% and XLI charges 0.12%.

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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