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. companies. The fund utilizes a quantitative, active management strategy, selecting stocks based on factors such as value, momentum, and quality.

Reputation and Reliability

First Trust is a well-established ETF provider known for its innovative and factor-based investment strategies. It has a solid track record of managing ETFs across various asset classes.

Management Expertise

The ETF is managed by a team of experienced investment professionals at First Trust Advisors L.P. The team has expertise in quantitative analysis and factor-based investing.

Goal

The ETF aims to provide long-term capital appreciation.

Investment Approach and Strategy

Strategy: The ETF employs an active management strategy that leverages a multi-factor model to identify and invest in small-cap stocks with favorable characteristics.

Composition The ETF primarily holds small-cap U.S. equities.

Market Share: The ETF's market share within the small-cap factor-based ETF segment is moderate.

Total Net Assets (AUM): 297500000

Key Competitors

• Avantis U.S. Small Cap Value ETF (AVUV)
• Dimensional US Small Cap ETF (DFAS)
• Vanguard Small-Cap Value ETF (VBR)

Competitive Landscape

The small-cap factor-based ETF market is competitive, with several established players offering similar strategies. DFAS competes on its specific factor selection methodology and active management. Its advantages could lie in its specific factor weighting and stock selection process, while disadvantages could be higher expense ratios compared to passively managed competitors.

Historical Performance: Historical performance data should be checked on reputable financial websites, considering past performance does not guarantee future results.

Benchmark Comparison: Performance should be compared against the Russell 2000 index or a similar small-cap benchmark to evaluate the fund's effectiveness.

Expense Ratio: 0.59

Average Trading Volume

The ETF's average trading volume is moderate, which can impact trade execution costs.

Bid-Ask Spread

The bid-ask spread is typically low, reflecting the ETF's moderate liquidity.

Market Environment Factors

Economic growth, interest rates, and investor sentiment towards small-cap stocks influence DFAS's performance. Sector-specific trends within the small-cap universe also play a role.

Growth Trajectory

The ETF's growth depends on its ability to consistently outperform its benchmark through its active factor-based approach. Changes in strategy and holdings are disclosed in the fund's prospectus and regular reports.

Competitive Edge

DFAS differentiates itself through its proprietary active factor model, which aims to identify undervalued small-cap stocks with strong momentum and quality characteristics. This active approach provides flexibility to adapt to changing market conditions, potentially generating alpha compared to passive small-cap ETFs. First Trust's reputation and distribution network further support the ETF's competitive position. However, active management also introduces the risk of underperformance relative to the benchmark.

Volatility

The ETF's volatility is expected to be relatively high due to its focus on small-cap stocks.

Market Risk

The ETF is exposed to market risk, including the risk of declines in the overall stock market and specific risks associated with small-cap companies, such as lower liquidity and higher sensitivity to economic conditions.

Ideal Investor Profile

The ideal investor is one who is seeking long-term capital appreciation, willing to tolerate higher volatility, and believes in the potential of factor-based investing in small-cap stocks.

Market Risk

This ETF is best suited for long-term investors who are comfortable with active management and small-cap exposure, not necessarily active traders or passive index followers.

First Trust Active Factor Small Cap ETF seeks long-term capital appreciation by investing in U.S. small-cap stocks based on value, momentum, and quality factors utilizing an active management style. It is suitable for long-term investors seeking factor-based exposure with a moderate level of risk who believe in the potential of the active factor model. The ETF carries market risk and volatility due to the small-cap nature, and has a moderate expense ratio. DFAS differentiates itself through its proprietary active factor model.

Data Sources:

• First Trust Website
• ETF.com
• Morningstar
• Yahoo Finance

Disclaimers:

The data and analysis provided are for informational purposes only and should not be considered investment advice. Past performance is not indicative of future results. Consult with a qualified financial advisor before making any investment decisions.