Making its debut on 08/27/2007, smart beta exchange traded fund First Trust STOXX European Select Dividend Index Fund (FDD) provides investors broad exposure to the European Equity ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Because the fund has amassed over $321.79 M, this makes it one of the average sized ETFs in the European Equity ETFs. FDD is managed by First Trust Advisors. This particular fund seeks to match the performance of the STOXX Europe Select Dividend 30 Index before fees and expenses.
The STOXX Europe Select Dividend 30 Index consists of 30 high dividend-yielding securities selected from the STOXX Europe 600 Index.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.57%.
It's 12-month trailing dividend yield comes in at 5.13%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
When you look at individual holdings, Sse Plc (SSE.LN) accounts for about 5.85% of the fund's total assets, followed by Intesa Sanpaolo Spa (ISP.IM) and Societe Generale S.a. (GLE.FP).
The top 10 holdings account for about 41.94% of total assets under management.
Performance and Risk
The ETF has gained about 21.93% and it's up approximately 20.47% so far this year and in the past one year (as of 12/17/2019), respectively. FDD has traded between $11.69 and $13.90 during this last 52-week period.
The ETF has a beta of 0.70 and standard deviation of 11.19% for the trailing three-year period, making it a medium risk choice in the space. With about 33 holdings, it has more concentrated exposure than peers.
First Trust STOXX European Select Dividend Index Fund is a reasonable option for investors seeking to outperform the European Equity ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
IShares MSCI Eurozone ETF (EZU) tracks MSCI EMU Index and the Vanguard FTSE Europe ETF (VGK) tracks FTSE Developed Europe All Cap Index. IShares MSCI Eurozone ETF has $6.19 B in assets, Vanguard FTSE Europe ETF has $14.58 B. EZU has an expense ratio of 0.47% and VGK charges 0.09%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the European Equity ETFs.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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First Trust STOXX European Select Dividend Index Fund (FDD): ETF Research Reports
Vanguard FTSE Europe ETF (VGK): ETF Research Reports
iShares MSCI Eurozone ETF (EZU): ETF Research Reports
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