Making its debut on 03/17/2016, smart beta exchange traded fund First Trust Dorsey Wright Dynamic Focus 5 ETF (FVC - Free Report) provides investors broad exposure to the Total Portfolio ETFs category of the U.S. equity market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix 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 $447.67 M, this makes it one of the largest ETFs in the Total Portfolio ETFs. FVC is managed by First Trust Advisors. This particular fund seeks to match the performance of the Dorsey Wright Dynamic Focus Five Index before fees and expenses.
The Dorsey Wright Dynamic Focus Five Index provides targeted exposure to five First Trust sector and industry based ETFs and the Nasdaq US T-Bill Index.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With one of the more expensive products in the space, this ETF has annual operating expenses of 0.89%.
It has a 12-month trailing dividend yield of 0.63%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
When you look at individual holdings, First Trust Dow Jones Internet Index Fund (FDN - Free Report) accounts for about 21.17% of the fund's total assets, followed by First Trust Nasdaq Bank Etf (FTXO - Free Report) and First Trust Technology Alphadex Fund (FXL - Free Report) .
Its top 10 holdings account for approximately 100% of FVC's total assets under management.
Performance and Risk
The ETF return is roughly 4.26% so far this year and was up about 21.16% in the last one year (as of 04/06/2018). In the past 52-week period, it has traded between $21.89 and $28.74.
FVC has a beta of 0.78 and standard deviation of 12.78% for the trailing three-year period. With about 5 holdings, it has more concentrated exposure than peers.
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