Exchange traded fund providers are expanding their lineups both in the U.S. and abroad. For instance, First Trust is planning its first foray into the European ETF market with three “smart beta” ETFs.
First Trust, the 11th largest U.S. ETF sponsor with $67.8 billion in assets under management, plans to offer three AlphaDEX ETFs that utilize alternative weighting styles based on growth and value scores, reports Chris Flood for Financial Times. The three funds are expected to come with a 0.85% exepsne ratio. [First Trust Lists Active ETF for Income]
First Trust has partnered with LGBR Capital to distribute the ETFs in Europe.
The line of AlphaDEX ETFs is part of a growing segment of rules-based strategies that offer actively managed investment methodologies in a passive index in an attempt to outuperform traditional market-capitalization weighted indices.
The AlpahDEX method categorizes stocks by growth, core and value. Growth stocks are ranked by price momentum, sales growth and sales to price ratio. Value stocks are screened for book value to stock price, cash flow to price ratio and return on assets. Lastly, Core stocks are scored on both growth and value, but the higher score is used.
Eric Anderson, vice-president at First Trust, said that the AlphaDEX ETFs have attracted interest among wealth managers and fund-of-fund managers as the ETFs have the potential to generate higher long-term returns with lower volatility than cap-weighted indices.
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Max Chen contributed to this article.