First Trust Horizon Managed Volatility Small/Mid ETF (HSMV)

Overview

The First Trust Horizon Managed Volatility Small/Mid ETF (HSIZ) seeks to provide total return, with an emphasis on managing volatility and downside risk, by investing in a diversified portfolio of small- and mid-cap U.S. equity securities. The fund utilizes a quantitative, rules-based approach to select and weight securities based on volatility characteristics.

Reputation and Reliability

First Trust is a well-established ETF provider known for its innovative and diverse ETF offerings. They have a solid track record in the ETF market.

Management Expertise

First Trust has a dedicated team of investment professionals with experience in quantitative investing and risk management.

Goal

Seeks total return, emphasizing managed volatility and downside risk within the small- and mid-cap U.S. equity space.

Investment Approach and Strategy

Strategy: The ETF employs a quantitative, rules-based strategy focusing on selecting and weighting small- and mid-cap stocks based on volatility factors. It does not track a specific index but aims to lower volatility.

Composition Primarily invests in U.S. small- and mid-cap equity securities. Holdings are rebalanced periodically based on volatility assessments.

Market Share: HSIZ's market share is relatively small compared to broader small-cap ETFs.

Total Net Assets (AUM): 124700000

Key Competitors

• IJR
• VB
• XSMO

Competitive Landscape

The small/mid-cap ETF market is highly competitive. HSIZ distinguishes itself with its managed volatility approach, but faces competition from broader, passively managed ETFs like IJR and VB which have significantly larger AUM and lower expense ratios. XSMO is another managed volatility small cap ETF. HSIZu2019s active management and volatility focus might appeal to investors seeking downside protection, but come with a higher expense ratio.

Historical Performance: Historical performance data should be sourced from reliable financial data providers to ascertain returns over 1, 3, 5, and 10 year periods.

Benchmark Comparison: The ETF's performance should be compared against a relevant small/mid-cap benchmark, like the Russell 2500 Index, and other volatility-focused ETFs to evaluate its effectiveness in achieving its stated goal.

Expense Ratio: 0.7

Average Trading Volume

The average trading volume for HSIZ is moderate, and investors should consider the liquidity when trading large blocks of shares.

Bid-Ask Spread

The bid-ask spread is generally moderate and can fluctuate based on market conditions and trading volume.

Market Environment Factors

Economic growth, interest rate changes, and investor sentiment towards small- and mid-cap companies can impact HSIZ's performance. Sector-specific trends within the small/mid-cap market also play a role.

Growth Trajectory

Growth trends are dependent on the continued demand for managed volatility strategies, performance relative to benchmarks, and ability to attract and retain AUM. Changes to strategy and holdings are disclosed periodically.

Competitive Edge

HSIZ's competitive advantage lies in its quantitative, rules-based approach to managing volatility within the small/mid-cap space. This strategy aims to provide downside protection during market downturns while still participating in market upside. The fund's focus on volatility as a primary factor differentiates it from traditional market-cap weighted small/mid-cap ETFs. The issuer's reputation and experience in quantitative investing further bolster its competitive standing.

Volatility

HSIZ is designed to exhibit lower volatility than the broader small/mid-cap market, though it's still subject to market risk.

Market Risk

Specific risks include those inherent to small- and mid-cap companies such as lower liquidity, greater sensitivity to economic cycles, and increased company-specific risks. The quantitative model is subject to model risk, where the model's assumptions and calculations might not accurately predict future volatility or performance.

Ideal Investor Profile

HSIZ is suited for investors seeking exposure to small- and mid-cap stocks while prioritizing downside protection and lower volatility. Investors with a moderate risk tolerance and a long-term investment horizon may find it suitable.

Market Risk

HSIZ may be suitable for long-term investors seeking to reduce portfolio volatility and participate in the growth potential of small- and mid-cap companies. It might also appeal to those concerned about market downturns.

The First Trust Horizon Managed Volatility Small/Mid ETF (HSIZ) offers exposure to U.S. small- and mid-cap equities with a focus on managing volatility and downside risk through a quantitative strategy. The ETF's managed volatility approach may appeal to risk-averse investors, but its higher expense ratio and active management differentiate it from lower-cost, passively managed alternatives. Investors should consider its suitability in light of their risk tolerance, investment goals, and time horizon. The ETF's performance is dependent on the effectiveness of its quantitative model and overall market conditions.

Data Sources:

• First Trust Website
• ETF.com
• Morningstar
• YCharts

Disclaimers:

This analysis is for informational purposes only and does not constitute investment advice. Investment decisions should be made based on individual circumstances and consultation with a qualified financial advisor. Past performance is not indicative of future results. Market share data may not be fully up-to-date.