First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)

Overview

The First Trust RiverFront Dynamic Emerging Markets ETF (RFEM) is an actively managed ETF focusing on providing total return by investing in equity securities of emerging market companies. The ETF uses a dynamic allocation strategy, shifting its investments based on market conditions and relative valuations. Its investment universe includes a diverse range of emerging market countries and sectors.

Reputation and Reliability

First Trust is a well-established ETF issuer with a reputation for providing innovative and actively managed investment solutions.

Management Expertise

First Trust has a dedicated team of experienced investment professionals managing its ETF offerings, leveraging their expertise in active portfolio management and macroeconomic analysis.

Goal

The ETF aims to provide investors with total return by investing primarily in equity securities of emerging market companies.

Investment Approach and Strategy

Strategy: RFEM is actively managed, not tracking a specific index. It employs a dynamic allocation strategy based on market conditions and relative valuations across different emerging market countries and sectors.

Composition The ETF primarily holds equity securities of companies located in emerging market countries. It may also invest in other asset classes to enhance returns or manage risk.

Market Share: RFEM's market share within the emerging markets ETF category is relatively small compared to larger, passively managed funds.

Total Net Assets (AUM): 117794760.54

Key Competitors

• Vanguard FTSE Emerging Markets ETF (VWO)
• iShares Core MSCI Emerging Markets ETF (IEMG)
• Schwab Emerging Markets Equity ETF (SCHE)

Competitive Landscape

The emerging markets ETF space is highly competitive, dominated by passively managed, low-cost funds like VWO, IEMG, and SCHE. RFEM's active management strategy offers the potential for outperformance but comes with higher fees. Its dynamic allocation may appeal to investors seeking a more tactical approach to emerging markets investing, but this active approach has not proven successful and RFEMs size is minimal in relation to other ETFs.

Historical Performance: Historical performance data should be sourced from financial data providers like Bloomberg, Yahoo Finance, or Morningstar. Analyze returns over 1, 3, 5, and 10-year periods (if available).

Benchmark Comparison: Compare RFEM's performance against a relevant emerging markets index, such as the MSCI Emerging Markets Index, to assess its added value from active management.

Expense Ratio: 0.91

Average Trading Volume

The average daily trading volume for RFEM is relatively low, potentially impacting trade execution costs for larger investors.

Bid-Ask Spread

The bid-ask spread for RFEM is typically wider than larger, more liquid ETFs, which can increase the cost of trading.

Market Environment Factors

Emerging market equities are influenced by global economic growth, commodity prices, currency fluctuations, and geopolitical events. These factors can significantly impact RFEM's performance.

Growth Trajectory

RFEM's growth trajectory depends on its ability to deliver competitive returns compared to passive emerging market ETFs and attract investor interest in its active management approach. Changes to strategy and holdings are dependent on the active management decisions.

Competitive Edge

RFEM's primary competitive advantage lies in its actively managed, dynamic allocation strategy. This approach aims to capitalize on short-term market opportunities and mitigate risks through active adjustments to country and sector allocations. However, the success of this strategy depends heavily on the fund manager's expertise and ability to accurately predict market movements. In practice, RFEM's size has stagnated, likely because its active approach has not provided consistent outperformance, especially compared to low-cost passive funds.

Volatility

Emerging markets are inherently more volatile than developed markets. RFEM's volatility will reflect the volatility of its underlying emerging market equity holdings.

Market Risk

RFEM is subject to market risk, including economic downturns, political instability, and currency fluctuations in emerging market countries. These risks can significantly impact the ETF's performance.

Ideal Investor Profile

The ideal investor for RFEM is one who is comfortable with higher risk and seeks potential outperformance through active management in emerging markets, and who is willing to pay a higher expense ratio for this active management.

Market Risk

RFEM may be suitable for long-term investors with a higher risk tolerance who believe in the potential of active management to generate superior returns in emerging markets. It is likely unsuitable for passive index followers.

The First Trust RiverFront Dynamic Emerging Markets ETF (RFEM) is an actively managed ETF focused on emerging market equities, aiming for total return through a dynamic allocation strategy. Its active management and higher expense ratio differentiate it from larger, passively managed competitors. The ETF's performance is tied to the expertise of the fund manager and the inherent volatility of emerging markets. RFEM is suitable for investors seeking active management in emerging markets and willing to accept higher risks and costs.

Data Sources:

• First Trust website
• Morningstar
• Yahoo Finance
• Bloomberg

Disclaimers:

This analysis is for informational purposes only and should not be considered investment advice. Investment decisions should be made based on individual circumstances and consultation with a qualified financial advisor. ETF data is subject to change.