First Trust is reworking one of its exchange traded funds to compete in its own category and to better complement existing products available.
According to a note, the First Trust Strategic Value Index Fund (NYSEArca: FDV) will begin trading as the First Trust Capital Strength ETF (NasdaqGM: FTCS) around June 3. FTCS has a 0.65% expense ratio.
FDV currently tries to reflect the performance of the Credit Suisse U.S. Value Index, which is comprised of 50 U.S. stocks with the highest market capitalization and highest HOLT valuation score. The ETF has $37.2 million in assets and has an average 5,167 trading volume.
The revamped FTCS ETF will try to reflect the performance of The Capital Strength Index, an equal-dollar weighted index that provides exposure to well-capitalized companies with strong market positions, screened for strong balance sheets, high degree of liquidity, ability to generate earnings growth and show financial strength and profit growth. The portfolio will be rebalanced quarterly.
Specifically, the index requires companies to have a long-term debt to market below 30%, return on equity above 15%, and the lowest combined short- and long-term volatility scores.
“We believe well-capitali9zed companies with strong balance sheets have the potential to provide their stockholders with a greater degree of stability and performance over time,” according to First Trust.
Top holdings as of May 24 include Raytheon company 2.2%, Illinois Tool Works 2.2%, Microsoft Corp 2.2%, Northrop Grumman Corp 2.2% and I.E. Du Ponte De Nemours and Co. 2.1%.
Sector allocations as of May 24 include industrials 22.8%, health care 19.4%, consumer goods 17.3%, consumer services 14.0%, technology 12.2%, financials 8.3%, oil & gas 4.0% and basic materials 2.1%.
First Trust believes that the new Capital Strength Index will help FTCS to provide investors with a better performance potential, with lower costs and access to underallocated component stocks or sectors, compared to existing fund products.
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Max Chen contributed to this article.