First Trust, a leading US provider of exchange-traded products, recently launched the international version of the popular First Trust Dorsey Wright Focus 5 Fund (FV), which has already amassed more than $350 million in assets since its debut in early March. The First Trust Dorsey Wright International Focus 5 ETF (IFV) is the latest example of the “smart beta” trend that has gained traction in the world of ETFs.
IFV is a fund of funds and uses the Dorsey Wright relative strength technical indicators for screening First Trust’s suite of AlphaDEX international funds with a momentum strategy overlay. The AlphaDEX suite of funds use a quantitative screen to that considers fundamentals such as cash flow, book value and price to sales.
Dorsey Wright Associates manages several funds for ETF provider PowerShares that apply the same Relative Strength methodology to individual stocks.
The new fund tracks the Dorsey Wright International Focus Five Index, a gauge that provides exposure to five international equity ETFs of First Trust based on relative-strength principle.
The RS model measures the price performance of a security against another security, a market average or the universe of securities and selects the top five that have the biggest potential to outperform.
Each ETF in the portfolio is assigned a score that allows Dorsey Wright to analyse the ranking of the fund relative to others in the universe. The analysis is performed every week and ETFs are replaced when they underperform based on relative strength.
The five region/country-based ETFs with the highest level of momentum are included in the portfolio while exposure to countries with sub-par price action is eliminated.
The current members of the Dorsey Wright International Focus Five index include First Trust Switzerland AlphaDEX Fund (24.59 percent), First Trust Canada AlphaDEX Fund (20.29 percent), First Trust Germany AlphaDEX Fund (18.58 percent), First Trust United Kingdom ALphaDEX Fund (18.49 percent) and the First Trust Emerging Markets Small Cap AlphaDEX Fund (18.06 percent).
The fund has an annual expense ratio of 1.1 percent.
Disclosure: No holdings
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