First Trust Emerging Markets Equity Select ETF (RNEM)

Overview

The First Trust Emerging Markets Equity Select ETF (FEMS) seeks long-term capital appreciation by investing in a diversified portfolio of equities from emerging market countries, selected based on fundamental factors and valuation metrics.

Reputation and Reliability

First Trust is a well-established and reputable ETF provider with a long track record of managing various investment strategies.

Management Expertise

First Trust has a dedicated team of investment professionals with experience in emerging market equities and quantitative analysis.

Goal

To seek long-term capital appreciation.

Investment Approach and Strategy

Strategy: The ETF employs a quantitative methodology to select and weight securities based on factors like value, profitability, and quality within emerging markets.

Composition Primarily holds stocks of companies located in emerging market countries across various sectors.

Market Share: FEMS has a relatively small market share compared to larger, more established emerging market ETFs.

Total Net Assets (AUM): 49.45

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 market ETF space is highly competitive, dominated by large, low-cost index tracking funds. FEMS differentiates itself through its quantitative selection process. A disadvantage is its higher expense ratio compared to its competitors. One advantage is the potential for superior returns by outperforming its benchmarks because of its selection process.

Historical Performance: Historical performance data should be obtained from financial data providers for various time periods.

Benchmark Comparison: The ETF's performance should be compared to a relevant emerging market index like the MSCI Emerging Markets Index.

Expense Ratio: 0.85

Average Trading Volume

FEMS's average trading volume is relatively low, which may impact the ease of buying and selling shares.

Bid-Ask Spread

The bid-ask spread can vary depending on market conditions and trading volume, but generally it will be wider than more heavily traded ETFs.

Market Environment Factors

Emerging market equities are sensitive to global economic growth, trade policies, currency fluctuations, and political stability.

Growth Trajectory

The ETF's growth trajectory depends on its ability to attract assets and generate competitive returns relative to its benchmark and peers. Any change to strategy or holdings will depend on the output of their model.

Competitive Edge

FEMS's competitive edge lies in its quantitative, factor-based approach to stock selection within emerging markets, attempting to outperform traditional market-cap weighted indices. Its focus on value, profitability, and quality factors provides a distinct investment approach. This approach aims to identify undervalued companies with strong fundamentals in emerging markets. However, the effectiveness of this strategy is dependent on the validity of the model and changing market dynamics, as well as the skill of the management team.

Volatility

Emerging market equities are generally more volatile than developed market equities due to political and economic instability.

Market Risk

The ETF is subject to market risk, currency risk, and political risk associated with investing in emerging market countries.

Ideal Investor Profile

The ideal investor is one seeking long-term capital appreciation from emerging market equities and comfortable with higher levels of risk.

Market Risk

FEMS is best suited for long-term investors who understand the risks and potential rewards of emerging market investing.

The First Trust Emerging Markets Equity Select ETF is designed for investors seeking long-term capital appreciation through emerging market equities, utilizing a quantitative stock selection methodology. It offers a differentiated approach compared to market-cap weighted funds, focusing on value, profitability, and quality factors. However, investors should be aware of the relatively higher expense ratio and emerging market risks, as well as FEMS's low AUM and trading volume. Overall, FEMS is not suitable for short term investing and might be best used to gain access to specific emerging market sectors within an existing well diversified portfolio.

Data Sources:

• First Trust Website
• ETF.com
• Morningstar

Disclaimers:

The data and analysis provided are for informational purposes only and should not be considered investment advice. Investment decisions should be based on individual circumstances and consultation with a qualified financial advisor.