First Trust breathes life into Tom Dorsey’s ‘ETF Ecosystem’ with a new fund using price-momentum screen.
First Trust today is bringing to market a sector-rotation equity strategy that uses Dorsey Wright relative strength technical indicators, that latest example of the “smart beta” wave that’s building in the world of ETFs.
The First Trust Dorsey Wright Focus 5 ETF has an annual expense ratio of 0.95 percent, or $95 for every $10,000 invested. The ETF is a fund of funds that makes use of other ETFs, and 65 basis points of the expense ratio constitutes so-called acquired fund fees related to investing in other funds.
The fund’s launch comes at a time when smart-beta funds focusing on dividends and volatility are coming to market, giving investors access to passive strategies with an active undertone based on changes in the investment markets.
According to FV’s fund fact sheet, relative strength is a ranking system used to measure a security’s price momentum relative to its peers. The First Trust Dorsey Wright Focus 5 ETF consists of the top-five-ranked First Trust sector and industry ETFs as identified by DWA’s relative strength rankings.
“This is where the phrase I coined ‘ETF Alchemy’ comes into play—taking models that have been wrapped up into ETFs and creating a portfolio from them,” Tom Dorsey, the head of Dorsey, Wright & Associates, told ETF.com in an email. “The ETF is definitely the best product for an individual investor because all rebalancing is done beneath the surface.”
The Cambria ETF Trust, the entity owned by Mebane Faber’s California-based investment firm, has filed updated regulatory paperwork detailing fees for four active and indexed ETFs covering a range of fixed-income and equity strategies in developed and emerging markets. The funds and the fresh details revealed in the filing are as follows:
- Cambria Sovereign High Yield Bond ETF (SOVB), 0.59 percent, or $59 for every $10,000 invested
- Cambria Global Value ETF (GVAL), 0.69 percent, or $69 for every $10,000 invested
- Cambria Global Momentum ETF (GMOM), 0.94 percent, or $94 for every $10,000 invested
- Cambria Value and Momentum ETF (VAMO), 0.79 percent, or $79 for every $10,000 invested
The proposed funds are likely to go live soon, and will come at a time when investors are looking for yields in all corners of the ETF space—including the developed and emerging markets. That’s likely to remain the case even as the Federal Reserve continues tapering its “quantitative easing” economic stimulus.
SOVB is an actively managed ETF that invests in emerging and developed-countries sovereign and quasi-sovereign high yield bonds, including debt securities issued by a national government, a supranational government or a state-owned enterprise or agency.
GVAL is an indexed fund and invests in equity securities of issuers located in developed and emerging countries, as well as exchange-traded funds composed of issuers located in developed and emerging countries.
GMOM is an active fund of funds that will invest in other ETFs, ETNs and closed-end funds with exposure to inverse strategies and emerging markets.
VAMO is an actively managed fund that will invest primarily in a wide range of domestic equity securities that are undervalued according to various valuation metrics.
J.P. Morgan Investment Management has filed regulatory paperwork for three smart-beta funds spanning developed and emerging markets, including the:
- JPMXF Diversified Return Global Equity ETF
- JPMXF Diversified Return International Ex-North America Equity ETF
- JPMXF Diversified Return Emerging Markets Equity ETF
The funds will track their respective FTSE indexes that select securities based on attractive relative valuation, positive price momentum, quality, low volatility and specific market capitalization.