In what is turning out to be another stellar year of asset growth for the U.S. exchange traded products industry, some exchange traded funds are really standing out for their asset-gathering proficiency, including the First Trust Dorsey Wright Focus 5 ETF (NASDAQ: FV).
The First Trust Dorsey Wright Focus 5 ETF debuted in March 2014 and by the end of last year, it was the year's most successful new ETF, finishing 2014 with over $1 billion in assets under management. Adding $1 billion in assets in 12 months is impressive for any ETF, let alone a new fund, but keep in mind FV gained more than $1 billion in just under 10 months of trading.
FV's asset growth is continuing unabated in 2015. Year-to-date, the ETF has added nearly $3.1 billion in new assets, easily putting it in the upper echelon of top asset-gathering ETFs this year. Now home to over $4.2 billion in assets, FV accounts for more than 10 percent of the $40.3 billion in ETF assets held by Illinois-based First Trust as of Oct. 20. The company is the .
A fun fact as noted by Vice President Paul Weisbruch in a note out Wednesday is that FV is now First Trust's biggest ETF.
“Most ETF model managers and institutional users of ETFs are familiar with First Trust as a formidable ETF sponsor, but we will bet that little to none realize which fund of the company is currently the largest in terms of assets under management thanks to very strong asset flows year to date in terms of creation activity,” said Weisbruch.
FV's success sparked the creation of an international equivalent, the First Trust Dorsey Wright International Focus 5 ETF (NASDAQ: IFV), which is no slouch in the asset-gathering department. However, IFV has risks as does FV. For example, the recent and ongoing retrenchment experienced by biotechnology stocks has heavily weighed on FV.
The ETF holds five other First Trust industry and sector funds, including the First Trust NYSE Arca Biotechnology Index Fund (NYSE: FBT) and the First Trust Health Care AlphaDEX Fund (NYSE: FXH). Those ETF's combine for nearly 43 percent of FV's weight. Obviously, FBT is a dedicated biotech fund, but FXH also features a 9.3 percent biotech weight.
“In layman’s terms, the firm Dorsey Wright whom is well known in the industry for their technical analysis studies and investment recommendations in the ETF universe based on such analytics, chooses various sector oriented First Trust ETFs based on momentum and relative strength rankings,” adds Weisbruch.
That biotech exposure is something to consider with FV and it explains the ETF's 90-day loss of 11.3 percent, more than double the loss suffered by the Nasdaq Composite over the same period. Additionally, FV could be facing a competitive threat.
The PowerShares DWA Tactical Sector Rotation Portfolio (NASDAQ: DWTR), which debuted less than two weeks ago, is something of a four-ETF competitor to FV and also uses the popular Dorsey Wright methodology. In less than two weeks, the PowerShares DWA Tactical Sector Rotation Portfolio has already gained $30.6 million in assets.
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