Today, First Trust launched its latest fund, the First Trust New Constructs Core Earnings Leaders ETF (FTCE).
FTCE has a net expense ratio of 0.60%. The fund seeks to offer similar investment results to that of the Bloomberg New Constructs Core Earnings Leaders Index.
“Increasing valuations have been a key driver of returns for the current bull market, while earnings growth has been more muted,” said Ryan Issakainen, CFA, senior vice president and ETF Strategist at First Trust. “Consequently, for the bull market to continue, we believe investors may turn their focus more heavily towards stocks that have the potential to deliver high quality, repeatable earnings.”
Robust Earnings in Focus
This Bloomberg index tracks the performance of the companies with the strongest earnings capture. Using data from new constructs, the index aims to maintain exposure to companies with strong earnings quality. This includes companies such as Nvidia, Eli Lilly, Meta, Mastercard, and Adobe, among others.
To assess which companies have dynamic earnings capture, the Bloomberg index analyzes the difference between a company’s reported earnings and its core earnings. Generally, core earnings are a measure of how profitable a business is outside of unusual or peripheral changes in value. By focusing on core earnings, the Bloomberg index may have a stronger measurement of how strong a company’s fundamentals are.
To track the Bloomberg index, FTCE intends to generally employ a full replication strategy. As such, the fund traditionally invests in all the same securities as the index.
Due to the nature of the full replication strategy, FTCE will usually invest in securities with the same weighting as the index. The Bloomberg index is rebalanced quarterly in January, April, July, and October. Once the index changes are released to the public, FTCE will shift its portfolio to match the index.
In terms of sector exposure, FTCE may focus on industries to a similar extent as the index does. Per the fund prospectus, the index has strong exposure to information technology companies as of Sept. 24, 2024.
Now available in the U.S. market, FTCE joins First Trust’s ever-growing lineup of funds. One of the largest First Trust funds, the First Trust Rising Dividend Achievers ETF (RDVY), has over $11 billion in assets under management.
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