Today First Trust is repurposing an existing ETF, transforming it into a fund that will rotate among two large-cap strategies and Treasury exposure.
The First Trust Dorsey Wright People’s Portfolio ETF (DWPP) was originally the First Trust CBOE S&P 500 VIX Tail Hedge Fund (VIXH), which launched in 2012 but never gathered significant assets. Today, VIXH makes the transition to become DWPP.
“The idea behind [DWPP’s name] is that Tom Dorsey, the intellectual capital behind the idea, believes it is a strategy everyone could or should participate in. It’s just a simple, easy-to-understand strategy that makes sense in a number of different types of investors’ portfolios,” said Ryan Issakainen, exchange-traded fund strategist and vice president at First Trust.
The newly incarnated DWPP comes with an expense ratio of 0.60% and is listed on the Nasdaq stock exchange.
DWPP’s strategy is based on Dorsey Wright’s point-and-figure relative-strength methodology. Essentially the fund’s methodology will use the relative-strength approach to determine whether the portfolio should be in U.S. equities or U.S. Treasuries.
If equities are selected, the relative-strength approach is again used to determine whether the fund should be allocated toward a market-cap-weighted strategy in the form of the Nasdaq US 500 Large-Cap Index or an equal-weighted strategy represented by the Nasdaq US Large Cap Equal Index. Both equity indexes include the same components and simply weight them differently, the prospectus said.
“It’s not a very complicated strategy, but it has that built-in risk management,” Issakainen said, noting that Dorsey Wright’s relative-strength approach is based on price signals and on the supply-and-demand concept.
The index is rebalanced every six months as long as it is allocated to equities, but the prospectus notes the relative-strength analyses are done on an ongoing basis.
First Trust offers three other products in the U.S. that track Dorsey Wright’s relative-strength strategies, including the $2.4 billion First Trust Dorsey Wright Focus 5 ETF (FV).
Contact Heather Bell at [email protected]