First Trust has partnered up with Dorsey Wright to launch another ETF that incorporates a relative strength strategy to hone in on market segments with the highest forward momentum.
On Tuesday, First Trust launched the First Trust Dorsey Wright DALI 1 ETF (NasdaqGM: DALI), which has a 0.92% expense ratio.
The First Trust Dorsey Wright DALI 1 ETF tries to reflect the performance of the Nasdaq Dorsey Wright DALI 1 Index, which consists exclusively of U.S.-listed exchange-traded funds across four broad asset classes, including U.S. equity securities, international equity securities, fixed income securities and commodities, and seeks to determine which of the four is most likely to experience the best investment performance until the next Index evaluation date, according to a prospectus sheet.
Nasdaq Dorsey Wright DALI 1 Index
The composition of the underlying index is determined by the highest levels of “relative strength” to screen for those companies with the best performance over the near term – relative strength calculation is an objective method of comparing two investment options to determine which of the two is exhibiting greater forward price momentum.
The indexing methodology is performed every two months, with the fund reconstituting or rebalancing into the asset class determined to have the highest degree of relative strength.
When DALI focuses on U.S. equities, the ETF holds 65% in an equal-weighted basket of the Dorsey Wright Focus Five Index’s component funds and 35% that is split evenly between the First Trust Large Cap Growth AlphaDEX Fund (FTC) and First Trust Small Cap Growth AlphaDEX Fund (FYC).