Fri, 12/04/2013 - 06:02
First Trust Advisors has entered the European exchange-traded fund market with the launch of a new family of AlphaDEX UCITS ETFs that First Trust will manage.
The first three European AlphaDEX UCITS ETFs launched on 11 April and will focus on UK, US and emerging market equity indices. They are listed on the London and Irish Stock Exchanges and are structured under an Irish UCITS IV company. Further launches are expected as demand grows.
This marks the first time First Trust’s AlphaDEX strategy is available as an investment product outside of the US.
The funds are: First Trust United Kingdom AlphaDEX UCITS ETF (FKU) which tracks the FTSE 100 Index; The First Trust US Large Cap Core AlphaDEX UCITS ETF (FEX), which tracks the S&P 500 Index; and the First Trust Emerging Markets AlphaDEX UCITS ETF (FEM), which tracks the MSCI Emerging Markets Index.
First Trust is one of the fastest growing ETF managers in the US; from launching its first ETF in 2005 it now manages USD10.6bn in ETF assets (as of 31 March 2013). First Trust’s AlphaDEX ETF products have seen strong growth over the last three years, driven by increasing US investor demand for innovative and alpha-seeking (as opposed to traditional beta-tracking) ETFs.
“We believe this is the optimal time to expand the AlphaDEX family of ETFs outside of the US because of the strong opportunities that AlphaDEX provides for investors that typically have only had access to market cap weighted ETFs in Europe,” says Dan Lindquist, managing director of First Trust. “We are committed to providing investors with opportunities to capitalise on companies with stronger investment merit through ETFs using our AlphaDEX methodology.”
Gillian Walmsley, head of listed products at London Stock Exchange, says: “We are delighted that First Trust has chosen London to make its entry onto the European ETF market. London Stock Exchange remains the pre-eminent European destination for ETF issuers and investors and we expect to see continued growth in the number of issuers and products available in 2013.”
First Trust’s patented AlphaDEX methodology seeks to generate alpha over a benchmark. The AlphaDEX ETFs are designed to track custom “enhanced” indices whilst adding alpha through the proprietary, rules-based AlphaDEX stock section methodology.
The enhanced indices that provide the basis for the AlphaDEX funds start with a broad-based index and are enhanced through a proprietary methodology that ranks the stocks using several factors. The goal of the methodology is to identify the stocks within the index that exhibit the fundamental characteristics that First Trust believes enables them to provide the greatest potential for capital appreciation.
“We want to provide the European market with the same advantages that the patented AlphaDEX system has brought to US investors. The stocks are ranked according to value and growth factors, rather than market cap,” says Eric Anderson, vice president for First Trust. “These new ETFs are designed to provide investors with targeted equity market exposure whilst seeking to generate positive alpha relative to the broad-based passive index from which it selects its stocks. Every step in the process is driven by a transparent, repeatable quantitative process.”
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