First Trust launches First Trust Capital Strength UCITS ETF

First Trust has launched the First Trust Capital Strength UCITS ETF (FTCS). Based on one of First Trust’s best-selling and long standing US strategies, which accumulated USD1.5 billion of inflows over 2019, FTCS tracks The Capital Strength Index.

The Index is designed to offer exposure to high quality companies with strong balance sheets and less volatile stock prices, while providing the potential for increased stability and positive performance in all market conditions. 

As a starting point, the largest 500 companies with a minimum three-month average daily dollar trading volume of $5 million are selected from the NASDAQ US Benchmark Index, and then to be eligible for inclusion in the Index, companies must have:

• At least USD1 billion in cash or short-term investments.
• A long-term debt to market cap ratio less than 30 per cent.
• A return on equity greater than 15 per cent.

Consequently, the qualifying securities are then ranked by a combined short-term (three month) and long-term (one year) realized volatility, and the 50 eligible securities with the lowest combined volatility score are selected, subject to a maximum of 30 per cent from any one sector based on the Industry Classification Benchmark, with a quarterly rebalance.

Gregg Guerin, Senior Product Specialist for First Trust says: “Over the last twenty-five years in times of market instability, quality and less volatile US equities have historically outperformed the S&P 500 Index in down months by 74 per cent and 85 per cent respectively. We are pleased to bring this rules-based strategy to market and believe FTCS offers advisers and wealth managers the potential for protecting in negative markets while participating in increasing markets. This is the latest addition First Trust has brought to market to provide advisors a ‘rules-based’ investment alternative, wrapped in a transparent and efficient UCITS ETF structure.”

The Fund is aimed at wealth managers, discretionary fund managers, advisers and institutional investors, has a total expense ratio of 0.60 per cent, and will be available in the USD share class on the London Stock Exchange from the 30 January 2020.