First Trust Horizon Managed Volatility Domestic ETF (HUSV)

Overview

The First Trust Horizon Managed Volatility Domestic ETF (NYSE: HMAV) is designed to provide investors with a managed approach to equity exposure, aiming to reduce volatility while participating in potential market upside. It focuses on U.S. equity securities and employs a quantitative strategy to manage risk and return characteristics. The ETF seeks to achieve its investment objective by investing in a diversified portfolio of domestic equity securities, including common stocks, preferred stocks, and exchange-traded funds, which are selected based on their perceived volatility and correlation characteristics.

Reputation and Reliability

First Trust is a well-established ETF provider with a broad range of offerings. They are known for their active management approach and focus on providing unique investment strategies. Their track record generally indicates reliability and consistent product development.

Management Expertise

First Trust ETFs are typically managed by experienced teams within First Trust Advisors L.P., which has a long history of managing assets across various investment strategies. The specific management team for HMAV leverages quantitative analysis and risk management expertise.

Goal

The primary investment goal of the First Trust Horizon Managed Volatility Domestic ETF is to seek attractive risk-adjusted returns over the long term, with an emphasis on managing downside risk.

Investment Approach and Strategy

Strategy: HMAV aims to achieve its objective by actively managing its portfolio based on a quantitative strategy that seeks to limit downside volatility and enhance returns. It does not track a specific passive index but rather constructs a portfolio based on proprietary methodologies.

Composition The ETF primarily holds U.S. equity securities, including common stocks, preferred stocks, and potentially other ETFs. The selection process is driven by quantitative factors designed to manage volatility.

Market Share: Information on the specific market share of HMAV within the broader managed volatility ETF sector is not readily available and can fluctuate significantly. It is considered a niche product within the managed volatility space.

Total Net Assets (AUM): 744570000

Key Competitors

• iShares MSCI USA Min Vol Factor ETF (USMV)
• Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)
• ProShares S&P 500 Dividend Aristocrats Quality ETF (BATS: VICO)

Competitive Landscape

The managed volatility ETF landscape is competitive, with several large players offering similar products. HMAV's competitive advantage lies in its specific quantitative methodology, which may offer a different risk-return profile compared to competitors. However, it faces challenges from more established ETFs with larger AUM and potentially greater liquidity.

Historical Performance: HMAV's historical performance shows periods of outperformance and underperformance relative to broader market indices. Its managed volatility strategy aims to provide downside protection, which can be beneficial in turbulent markets, but may also lead to underperformance in strong bull markets.

Benchmark Comparison: While HMAV does not track a specific benchmark, its performance is often evaluated against broader equity indices like the S&P 500, with a focus on its risk-adjusted returns and volatility reduction capabilities.

Expense Ratio: 0.49

Average Trading Volume

The ETF's average daily trading volume is generally sufficient for most retail investors but may be lower than that of larger, more established ETFs, potentially impacting ease of execution for very large trades.

Bid-Ask Spread

The bid-ask spread for HMAV is typically tight enough for most retail investors, reflecting reasonable liquidity in the market.

Market Environment Factors

HMAV is sensitive to macroeconomic conditions, interest rate movements, and overall equity market sentiment. Its managed volatility strategy is particularly relevant in environments characterized by heightened uncertainty or potential downturns. Sector-specific trends can also influence the performance of its underlying holdings.

Growth Trajectory

The ETF's growth trajectory is influenced by investor demand for lower-volatility equity solutions and the perceived effectiveness of its proprietary quantitative strategy. Changes in the broader market and competitive landscape can also impact its AUM and strategic evolution.

Competitive Edge

HMAV's competitive edge stems from its proprietary quantitative methodology for selecting and managing its portfolio, aiming to achieve both downside protection and equity participation. This systematic approach offers a disciplined and rules-based strategy that differentiates it from more discretionary actively managed funds or passive index trackers. The focus on volatility management caters to a specific investor need for reduced portfolio fluctuations.

Volatility

As a managed volatility ETF, HMAV aims to reduce volatility compared to broad market indices. However, it is still an equity-based ETF and will experience fluctuations in value, particularly during periods of extreme market stress.

Market Risk

The ETF is subject to market risk, including the risk that the value of its underlying equity holdings may decline due to factors affecting the broader stock market, specific industries, or individual companies. Interest rate risk and credit risk are also potential concerns depending on the specific instruments held.

Ideal Investor Profile

The ideal investor for HMAV is one seeking to reduce overall portfolio volatility without entirely sacrificing equity market exposure. This includes investors who are concerned about downside risk, are in or approaching retirement, or want to diversify their existing equity holdings with a lower-volatility component.

Market Risk

HMAV is best suited for long-term investors who prioritize risk management and are looking for a more stable equity exposure. It is less ideal for active traders seeking high-frequency gains or those who primarily focus on maximum capital appreciation in bull markets.

The First Trust Horizon Managed Volatility Domestic ETF (HMAV) aims to provide investors with a managed approach to U.S. equities, focusing on reducing volatility while participating in market upside. It employs a proprietary quantitative strategy for security selection and risk management. While facing competition in the managed volatility space, HMAV offers a distinct methodology for investors seeking downside protection. Its suitability lies with long-term investors prioritizing risk management over aggressive growth.

Data Sources:

• First Trust website
• Financial data providers (e.g., Morningstar, Bloomberg)

Disclaimers:

This information is for educational purposes only and does not constitute financial advice. Past performance is not indicative of future results. Investors should consult with a qualified financial advisor before making any investment decisions.