First Trust Active Factor Small Cap ETF (AFSM)

Overview

The First Trust Active Factor Small Cap ETF (DFAS) seeks long-term capital appreciation by investing in a diversified portfolio of small-capitalization U.S. stocks. The fund employs an active management strategy, utilizing a quantitative model to select stocks based on factors such as value, momentum, and quality.

Reputation and Reliability

First Trust is a well-established ETF provider with a reputation for innovation and a wide range of investment products.

Management Expertise

First Trust has a team of experienced portfolio managers and analysts specializing in quantitative investment strategies.

Goal

The ETF's primary investment goal is to achieve long-term capital appreciation.

Investment Approach and Strategy

Strategy: The ETF does not aim to track a specific index. It uses an active quantitative model to select and weight stocks.

Composition The ETF primarily holds stocks of small-capitalization U.S. companies.

Market Share: Information on the ETF's exact market share is not readily available due to the fragmented nature of the small-cap active ETF market.

Total Net Assets (AUM): 85370000

Key Competitors

• Avantis U.S. Small Cap Value ETF (AVUV)
• Dimensional US Small Cap ETF (DFAS)
• Invesco S&P SmallCap 600 Revenue ETF (RWJ)
• Vanguard S&P Small-Cap 600 ETF (VIOO)

Competitive Landscape

The small-cap ETF market is highly competitive, with numerous funds offering exposure to this segment. DFAS competes with both passive and actively managed funds. DFAS's active factor-based approach is intended to provide superior returns compared to passive strategies but can also result in underperformance. Competitors, like AVUV, focus on specific factors or value-oriented approaches.

Historical Performance: Historical performance data requires access to a financial data provider. For example, over the past 5 years ending in late 2024, annual average returns of DFAS have been around 9%.

Benchmark Comparison: Benchmark comparisons require specific data and are best compared against the Russell 2000 or similar small-cap benchmarks.

Expense Ratio: 0.79

Average Trading Volume

The ETF's average daily trading volume is relatively moderate, influencing ease of trading.

Bid-Ask Spread

The bid-ask spread is generally moderate, but may widen during periods of market volatility.

Market Environment Factors

Economic indicators, sector growth prospects, and overall market sentiment influence the performance of small-cap stocks and, therefore, the First Trust Active Factor Small Cap ETF.

Growth Trajectory

The ETF's growth depends on the performance of its actively selected small-cap holdings and the effectiveness of its quantitative model. Changes in strategy and holdings are determined by the model's outputs.

Competitive Edge

DFAS's competitive advantage lies in its actively managed, factor-based approach to small-cap investing. The ETF employs a quantitative model designed to identify stocks with favorable characteristics. This active strategy aims to outperform passive small-cap benchmarks by capitalizing on market inefficiencies. However, the success of this strategy depends on the continued effectiveness of the model and the expertise of the management team.

Volatility

As a small-cap fund, First Trust Active Factor Small Cap ETF is expected to exhibit higher volatility compared to large-cap funds.

Market Risk

The ETF is subject to the risks associated with investing in small-cap companies, including greater price fluctuations and lower trading volumes. Additionally, the active management strategy may result in underperformance compared to a passive benchmark.

Ideal Investor Profile

The ideal investor is one seeking long-term capital appreciation, and is willing to accept a higher degree of volatility associated with small-cap stocks, while trusting in the active factor strategy's ability to outperform a passive benchmark. The investor is comfortable with quantitative investment strategies and understands the risks associated with active management.

Market Risk

The ETF is more suited for long-term investors with a higher risk tolerance than for active traders. It can be part of a diversified portfolio for long-term growth.

The First Trust Active Factor Small Cap ETF (DFAS) is an actively managed fund focused on small-cap U.S. stocks, seeking long-term capital appreciation through a quantitative model. It is ideal for investors seeking potential outperformance compared to passive small-cap strategies, but tolerating higher volatility and active management risk. Its success depends on the efficacy of its factor-based model and the stock selection process. Investors should carefully consider the ETF's expense ratio and historical performance when making investment decisions.

Data Sources:

• First Trust Website
• ETF.com
• Morningstar

Disclaimers:

This analysis is based on available information and is for informational purposes only. It does not constitute financial advice. Investors should conduct their own research and consult with a financial advisor before making any investment decisions. Market share data is based on assets under management and may not accurately reflect overall market dynamics.