Hougan: First Trust's Growing Presence

April 03, 2014

The firm scuffled along for years with relatively low assets in most of its ETFs, and attracted some criticism for allowing ETFs to wither on the vine with low assets and limited liquidity without closing them. But in recent years, its funds have performed well.

Over the past two years, for instance, the First Trust Health Care AlphaDEX ETF (FXH | B-61) has outperformed the Healthcare Select Sector SPDR Fund (XLV | A-92) by more than 5 percentage points.

Outperformance_Of_First_Trust_ETFs

Whether you believe that performance will persist or not is a fair question. But what’s not a question is that investors are starting to buy in on the belief that it will.

A lot of people are asking questions about whether smart-beta ETFs and actively managed ETFs will gain traction with investors. First Trust’s success suggests both can, and possibly, in a big way.

People do buy performance. But it takes time: You won’t sell much until you have a three-year track record that looks pretty, and a good sales force to get that message out into the world.

First Trust has both, and right now that’s catapulting it into becoming a major ETF provider.


At the time this article was written, the author held no positions in the securities mentioned. Contact Matt Hougan at [email protected].

 

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