Daily ETF Watch: Niche Funds With A Twist

First Trust files for industry-focused ETFs that use multifactor approaches.

Reviewed by: Heather Bell
Edited by: Heather Bell

First Trust has recently filed for seven funds that will offer investors a multifactor approach to some key industry groups. The ETFs track Nasdaq indexes that select their components based on momentum, dividend yield and low volatility.

The list of funds in the filing includes the following:

  • First Trust Nasdaq Bank ETF
  • First Trust Nasdaq Food & Beverage ETF
  • First Trust Nasdaq Oil & Gas ETF
  • First Trust Nasdaq Pharmaceuticals ETF
  • First Trust Nasdaq Retail ETF
  • First Trust Nasdaq Semiconductor ETF
  • First Trust Nasdaq Transportation ETF

Eligible companies must meet minimum average daily volume requirements, be components of the Nasdaq US Benchmark Index and fall into their fund’s designated industry group. From there, the methodology ranks the components based on the three designated factors and adds the rankings together.

The bank, semiconductor and transportation funds’ benchmarks each select the top 30 stocks from the summed rankings for inclusion and weight them according to 12-month average liquidity, with additional caps to keep individual stocks from dominating the weightings.

The pharmaceuticals fund’s benchmark selects the top 50 stocks from the summed rankings and also weights them by liquidity.

Meanwhile, the food & beverage, oil & gas and retail funds select the top 50 stocks from the summed rankings and weight them by modified market capitalization.

So far, factor-based funds have mainly been limited to geographic slices, although John Hancock has launched four ETFs using a multifactor methodology that targets broad sectors.

The filing did not include tickers or expense ratios, but it did indicate the funds will list on the Nasdaq stock exchange.

Additional Updates

Two funds are slated for 1-for-2 share splits today, March 15:

Contact Heather Bell at [email protected].

Heather Bell is a former managing editor of etf.com. She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.