In this post-coronavirus environment, the exchange traded fund industry, like many other market segments, has had to adapt to a new stay-at-home mindset.
Take, for example, First Trust, which is known for their strength of hundreds of wholesalers and internal consultants, has changed the way it has done business to meet financial advisors whom can’t be on the road and meeting in person today. First Trust has been very successful in pivoting on their “high touch” style of relationships with advisors.
Back in March, First Trust started daily 20 minute calls for financial advisors, and they haven’t slowed down since, continuing their weekly calls on Wednesdays or “Westbury Wednesday” hosted by CIO Brian Westbury.
“Advisors love having the ability to get regular market and economic updates. The advisory community hasn’t suffered from remote overload,” Ryan Issakainen, ETF Strategist at First Trust, told ETF Trends.
Among the focus areas that financial advisors are now embracing, Issakainen highlighted several themes, such as the First Trust TCW Opportunistic Fixed Income ETF (FIXD), which enjoyed almost $500 million in net inflows in August and $2.3 billion in inflows year-to-date. The First Trust TCW Opportunistic Fixed Income ETF is an actively managed exchange-traded fund. The Fund’s investment objective is to seek to maximize long-term total return by using a combination of top-down business cycle analysis and bottom-up fundamental research, focusing on duration, yield curve, sector allocation, issue selection, and opportunistic trading.
The First Trust Low Duration Opportunities ETF (LMBS) has also been another popular play, attracting $2 billion in net inflows year-to-date. The actively managed ETF tries to generate current income and capital appreciation through investment grade, mortgage-related debt securities, and other mortgage-related instruments tied to residential and commercial mortgages.
Factor investments or smart beta ETFs have also been a way for investors to ride out the market volatility. For example, the First Trust Capital Strength ETF (FTCS), which tilts toward quality, brought in $2 billion this year as well. FTCS screens for high cash on balance sheets, low leverage, and low volatility.
Furthermore, financial advisors have used thematic ETF strategies to take advantage of the disbursement of returns in the markets, especially those that have been accelerated by the pandemic. For instance, the First Trust ISE Cloud Computing Index Fund (NasdaqGM: SKYY) and the First Trust NASDAQ CEA Cybersecurity ETF (NasdaqGM: CIBR) have been among the hottest plays this year, attracting $1.6 billion and $726 million in net inflows.
SKYY tracks the ISE Cloud Computing Index and could help investors capture a growing trend. The ETF provides exposure to Infrastructure-as-a-Service, Platform-as-a-Service, and Software-as-a-Service companies.
Meanwhile, CIBR has benefited from the shift to working at home as more organizations see the benefit of increasing investments in cybersecurity solutions. CIBR tries to reflect the performance of the Nasdaq CTA Cybersecurity Index, which is designed to track the performance of companies engaged in the cybersecurity segment of the technology and industrials sectors. It includes companies primarily involved in the building, implementation, and management of security protocols applied to private and public networks, computers, and mobile devices to protect the integrity of data and network operations.
Green energy themes have been popular now but also on the other side of the pandemic. The ESG story and the poor performing energy market are both a part of this. The First Trust NASDAQ Clean Edge Green Energy Index Fund (NasdaqGM: QCLN) follows the NASDAQ Clean Edge Green Energy Index, which is designed to track the performance of small, mid, and large capitalization clean energy companies that are publicly traded in the United States. Additionally, the more focused First Trust Global Wind Energy ETF (FAN) tracks the global wind energy sector.
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