First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)

Overview

The First Trust RiverFront Dynamic Emerging Markets ETF (RFEM) seeks to provide capital appreciation by investing in emerging market equities. Its investment strategy is dynamic, aiming to overweight countries and sectors it believes will outperform, based on proprietary research and a flexible approach to country and sector allocation. The ETF focuses on companies domiciled in or with significant business operations in emerging market countries.

Reputation and Reliability

First Trust is a well-established ETF provider with a broad range of offerings across various asset classes and geographies. They are known for their diverse product suite and institutional approach to ETF management, suggesting a reliable and reputable issuer.

Management Expertise

The ETF is sub-advised by RiverFront Investment Group, LLC, which specializes in global asset allocation and investment strategies. RiverFront brings expertise in identifying global investment opportunities and managing dynamic portfolio allocations, particularly in international and emerging markets.

Goal

The primary investment goal of RFEM is to achieve long-term capital appreciation by investing in a diversified portfolio of emerging market equities.

Investment Approach and Strategy

Strategy: RFEM does not aim to track a specific index. Instead, it employs a dynamic, actively managed strategy that seeks to identify and invest in companies within emerging markets that RiverFront Investment Group believes offer the best risk-reward potential. This involves active decisions on country and sector allocation.

Composition The ETF primarily holds equities of companies located in emerging market countries. The composition can vary significantly based on the sub-advisor's tactical asset allocation decisions, potentially overweighting certain countries or sectors and underweighting others relative to broad emerging market indices.

Market Share: As of recent data, RFEM is a mid-sized ETF within the Emerging Markets Equity ETF category. While it has a dedicated following and offers a distinct active approach, it does not dominate the market share compared to passive index-tracking ETFs in the same space.

Total Net Assets (AUM): 175500000

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 landscape is highly competitive, dominated by large, passive index-tracking ETFs with very low expense ratios. RFEM competes by offering an actively managed approach, which can lead to higher fees but also the potential for outperformance. Its advantage lies in its dynamic allocation strategy and the potential for nimble adjustments to market conditions, while its disadvantage is the higher expense ratio and the inherent risk of active management not outperforming its benchmark or peers.

Historical Performance: RFEM has shown mixed historical performance, reflecting the inherent volatility of emerging markets and the challenges of active management to consistently outperform. Its performance can deviate significantly from broad emerging market indices due to its active country and sector allocation strategy. For specific numerical data, reference to recent fund fact sheets or financial data providers is recommended.

Benchmark Comparison: RFEM aims to outperform its peers and potentially its benchmark indices through active management. However, due to its dynamic allocation, it may not always track a specific broad emerging market index closely. Its performance relative to benchmarks like the MSCI Emerging Markets Index should be evaluated over various market cycles.

Expense Ratio: 0.99

Average Trading Volume

The ETF exhibits moderate average daily trading volume, which suggests reasonable liquidity for most investors, though it may be less liquid than the largest passive emerging market ETFs.

Bid-Ask Spread

The bid-ask spread for RFEM is generally competitive for an actively managed emerging markets ETF, but may be wider than that of highly liquid, passive alternatives during periods of market stress.

Market Environment Factors

RFEM is influenced by a range of factors including global economic growth, geopolitical events in emerging market countries, commodity prices, currency fluctuations, and interest rate policies in developed and emerging economies. Sector performance within emerging markets, such as technology, financials, and materials, also plays a significant role.

Growth Trajectory

The ETF's growth trajectory is tied to the overall performance of emerging markets and its ability to effectively implement its dynamic allocation strategy. Changes in its holdings and country/sector weights are frequent, reflecting the sub-advisor's ongoing market assessment and strategic adjustments.

Competitive Edge

RFEM's competitive edge lies in its dynamic, actively managed approach to emerging markets. By employing RiverFront Investment Group's proprietary research and flexible allocation strategy, the ETF aims to navigate the complexities and volatilities of emerging economies more effectively than static index-based funds. This allows for tactical adjustments to capitalize on perceived market inefficiencies and opportunities, potentially leading to enhanced risk-adjusted returns.

Volatility

As an emerging markets ETF, RFEM exhibits higher historical volatility compared to developed market equities. Its dynamic allocation strategy can further amplify this volatility, as it may concentrate holdings in certain regions or sectors that experience significant price swings.

Market Risk

The specific market risks associated with RFEM's underlying assets include political instability, currency devaluation, sovereign debt concerns, regulatory changes, and economic downturns specific to emerging market countries. Additionally, currency risk is a significant factor, as fluctuations in emerging market currencies against the US dollar can impact returns.

Ideal Investor Profile

The ideal investor for RFEM is one seeking exposure to emerging markets with an active management approach, willing to accept higher volatility and fees in pursuit of potentially higher returns. They should have a long-term investment horizon and a moderate to aggressive risk tolerance.

Market Risk

RFEM is best suited for long-term investors who believe in the growth potential of emerging markets and are looking for an actively managed strategy that can adapt to changing market conditions. It is less suitable for passive index followers seeking minimal expenses or for very risk-averse investors.

The First Trust RiverFront Dynamic Emerging Markets ETF (RFEM) offers an actively managed approach to investing in emerging market equities. It seeks capital appreciation through dynamic country and sector allocation, guided by RiverFront Investment Group's expertise. While its expense ratio is higher than passive alternatives, it provides the potential for outperformance by actively navigating market volatilities. Investors should have a long-term perspective and a higher risk tolerance due to the inherent nature of emerging markets and active management.

Data Sources:

• First Trust website (for ETF details, prospectus, and fact sheets)
• Financial data providers (e.g., Morningstar, ETF.com, Bloomberg for historical performance, AUM, and expense ratios)
• Financial news and analysis websites for market commentary and competitor information.

Disclaimers:

This information is for informational purposes only and should not be considered investment advice. Past performance is not indicative of future results. Investment decisions should be based on individual financial circumstances, objectives, and consultation with a qualified financial advisor. Data and figures are subject to change and may vary across different sources.