ETF Trends
ETF Trends
  • First Trust is planning to introduce a dynamic version of its popular First Trust Dorsey Wright Focus 5 ETF (NasdaqGM: FV)
  • First Trust Dorsey Wright Dynamic Focus 5 ETF (NasdaqGM: FVC) is expected to debut today
  • The new ETF will track the Dorsey Wright Dynamic Focus Five Index

First Trust, the seventh-largest U.S. ETF issuer, is planning to introduce a dynamic version of its popular First Trust Dorsey Wright Focus 5 ETF (NasdaqGM: FV). The First Trust Dorsey Wright Dynamic Focus 5 ETF (NasdaqGM: FVC) is expected to debut today.

The new ETF will track the Dorsey Wright Dynamic Focus Five Index.

“The index is designed to provide targeted exposure to five First Trust sector and industry based ETFs as identified by DWA’s proprietary relative strength methodology. This methodology is a ranking system used to measure a security’s price momentum relative to its peers and helps DWA identify meaningful patterns in daily share price movements,” according to a statement issued by First Trust.

FV, one of the most successful ETFs to come to market in 2014, follows DWA’s relative strength ranking system where sector ETFs are compared to each other to measure price momentum relative to other ETFs in the universe and the top five ranking ETFs are included in the underlying index. The momentum strategy basically bets that hot movers will continue to rise, so investors would essentially be buying high and selling even higher.

FVC’s underlying index “allocates to the cash index when the relative strength of more than one-third of the universe of First Trust ETFs begins to diminish relative to the cash index. The index seeks to identify major themes in the market, have exposure to those sectors whose price action is superior to others in the universe, and eliminate exposure to those sectors whose price action is sub-par to others in the universe. In instances where relative strength diminishes across equity sectors, the index gains varying amounts of exposure to the cash index,” according to the statement.