Launched on 08/27/2007, the First Trust STOXX European Select Dividend Index Fund (FDD) is a smart beta exchange traded fund offering broad exposure to the European Equity ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Managed by First Trust Advisors, FDD has amassed assets over $296.09 M, making it one of the larger ETFs in the European Equity ETFs. This particular fund, before fees and expenses, seeks to match the performance of the STOXX Europe Select Dividend 30 Index.
The STOXX Europe Select Dividend 30 Index consists of 30 high dividend-yielding securities selected from the STOXX Europe 600 Index.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.57% for FDD, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 5.38%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
When you look at individual holdings, Sse Plc (SSE.LN) accounts for about 5.02% of the fund's total assets, followed by Intesa Sanpaolo Spa (ISP.IM) and Royal Dutch Shell Plc (class B) (RDSB.LN).
FDD's top 10 holdings account for about 40.38% of its total assets under management.
Performance and Risk
The ETF has added roughly 6.57% so far this year and is down about -3.33% in the last one year (as of 08/05/2019). In the past 52-week period, it has traded between $11.69 and $13.39.
FDD has a beta of 0.71 and standard deviation of 11.42% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 31 holdings, it has more concentrated exposure than peers.
First Trust STOXX European Select Dividend Index Fund is not a suitable option for investors seeking to outperform the European Equity ETFs segment of the market. Instead, there are other ETFs in the space which investors should 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 $5.50 B in assets, Vanguard FTSE Europe ETF has $13.23 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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