First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)

Overview

The First Trust RiverFront Dynamic Emerging Markets ETF (RFEM) is an actively managed ETF that seeks to achieve capital appreciation by investing in emerging market equities. It focuses on identifying companies with strong growth potential and favorable economic conditions within emerging markets. The ETF's investment strategy is dynamic, allowing for adjustments based on evolving market opportunities and risks.

Reputation and Reliability

First Trust is a well-established ETF provider known for its diverse range of actively managed and index-based ETFs. They have a solid track record in the ETF industry, offering a variety of investment strategies and asset classes. RiverFront Investment Group, the sub-advisor, is recognized for its global investment expertise and dynamic allocation approach.

Management Expertise

The ETF is sub-advised by RiverFront Investment Group, which brings extensive experience in managing global and emerging market portfolios. Their team employs a research-driven, flexible approach to portfolio construction, aiming to navigate the complexities of emerging markets.

Goal

The primary investment goal of the First Trust RiverFront Dynamic Emerging Markets ETF is to provide long-term capital appreciation.

Investment Approach and Strategy

Strategy: RFEM is an actively managed ETF and does not track a specific index. Instead, RiverFront Investment Group actively selects securities based on their research and conviction, aiming to outperform broad emerging market benchmarks.

Composition The ETF primarily holds a diversified portfolio of emerging market equities, including large-cap, mid-cap, and small-cap companies across various sectors and countries within emerging economies. The specific holdings are subject to active management and can change based on market conditions and the investment team's outlook.

Market Share: Precise, real-time market share data for individual ETFs is dynamic and often proprietary. However, RFEM operates within the broad emerging markets ETF category, which is competitive.

Total Net Assets (AUM):

Key Competitors

• Vanguard FTSE Emerging Markets ETF (VWO)
• iShares Core MSCI Emerging Markets ETF (IEMG)
• iShares MSCI Emerging Markets ETF (EEM)

Competitive Landscape

The emerging markets ETF space is highly competitive, dominated by large, passive index-tracking funds with very low expense ratios. RFEM's active management approach and higher expense ratio differentiate it from these passive peers. Its advantage lies in the potential for outperformance through active selection, while its disadvantage is the higher cost and the risk that active management may not consistently beat the index.

Historical Performance: Historical performance data for RFEM can be found on financial data providers' websites, showing its returns over various periods (e.g., 1-year, 3-year, 5-year, since inception). Performance is influenced by the dynamic allocation strategy and the inherent volatility of emerging markets.

Benchmark Comparison: RFEM's performance is typically compared against benchmarks like the MSCI Emerging Markets Index. As an actively managed fund, its objective is to outperform this benchmark, though consistent outperformance is not guaranteed.

Expense Ratio: 0.99

Average Trading Volume

The ETF's average trading volume fluctuates but is generally lower than the large passive emerging markets ETFs, indicating moderate liquidity.

Bid-Ask Spread

The bid-ask spread for RFEM is typically wider than for highly liquid ETFs, reflecting its active management and potentially less frequent trading of its underlying holdings.

Market Environment Factors

RFEM is influenced by global economic growth, geopolitical stability in emerging nations, currency fluctuations, commodity prices, and interest rate policies in major economies. Emerging markets are generally more sensitive to these factors than developed markets.

Growth Trajectory

The growth trajectory of RFEM depends on the performance of emerging markets and the effectiveness of RiverFront's dynamic allocation strategy. Changes in holdings are a natural part of its active management process to adapt to evolving market conditions and seek alpha.

Competitive Edge

RFEM's primary competitive edge lies in its active management by RiverFront Investment Group, which seeks to exploit inefficiencies and opportunities in emerging markets that passive strategies may miss. The dynamic allocation approach allows the manager to adjust portfolio exposure based on forward-looking assessments of market conditions and risks, potentially offering downside protection or enhanced upside capture. This flexibility is a key differentiator in a market often dominated by static index replication.

Volatility

RFEM exhibits higher historical volatility compared to broad developed market ETFs due to its investment in emerging markets, which are inherently more susceptible to economic and political instability.

Market Risk

Specific market risks include currency risk, political risk, sovereign risk, and the risk of lower liquidity in some emerging market securities. The active management strategy also carries the risk that the manager's decisions may lead to underperformance relative to the benchmark.

Ideal Investor Profile

The ideal investor for RFEM is one seeking exposure to emerging markets with the aim of long-term capital appreciation and who believes in the value of active management. Investors should have a higher risk tolerance due to the inherent volatility of emerging markets.

Market Risk

RFEM is best suited for long-term investors who understand and can tolerate the risks associated with emerging markets and are looking for an actively managed approach to potentially enhance returns.

The First Trust RiverFront Dynamic Emerging Markets ETF (RFEM) is an actively managed fund targeting long-term capital appreciation in emerging markets. Sub-advised by RiverFront Investment Group, it utilizes a dynamic allocation strategy, differentiating itself from passive index trackers. While offering the potential for alpha generation, RFEM comes with a higher expense ratio and the inherent volatility and risks associated with emerging market equities. It is best suited for risk-tolerant, long-term investors seeking active management in this growth-oriented asset class.

Data Sources:

• First Trust Website
• RiverFront Investment Group Website
• Financial data providers (e.g., Morningstar, ETF.com, Yahoo Finance)

Disclaimers:

This information is for illustrative purposes and not investment advice. ETF performance and holdings are subject to change. Investors should conduct their own research and consult with a financial advisor before making investment decisions. Market share data is illustrative and may not be precise.