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First Trust, a leading global provider of exchange-traded funds, has teamed up with Dorsey, Wright & Associates (DWA), an equity portfolio management and research firm, to launch the First Trust Dorsey Wright Focus 5 ETF (FV).
The fund, which has been listed on Nasdaq, seeks investment results that correspond to the price and yield of an equity index called the Dorsey Wright Focus Five Index.
Designed by DWA, renowned specialists in the field of technical analysis, the Dorsey Wright Focus Five Index provides targeted exposure to the five First Trust sector- and industry-based ETFs identified by DWA to offer the greatest potential to outperform the other ETFs in the selection universe. The selection universe is composed of First Trust US sector and industry-based ETFs.
To determine inclusion in the index, the ETFs are compared to each other using the DWA relative strength ranking system. This ranking system measure an ETF’s price momentum relative to its peers. Each ETF is given a score to objectively determine where it ranks relative to all other ETFs in the universe. The top five ranking ETFs are included in the index and the relative strength analysis is conducted on a weekly basis. ETFs are replaced when they fall sufficiently out of favour, based on their relative strength, versus the other ETFs within the universe.
As of March 12, 2014, the index was comprised of the following ETFs: First Trust NYSE Arca Biotechnology Index Fund (FBT), First Trust Dow Jones Internet Index Fund (FDN), First Trust Health Care AlphaDEX Fund (FXH), First Trust Consumer Discretionary AlphaDEX Fund (FXD), First Trust Consumer Staples AlphaDEX Fund (FXG).
The index is rebalanced periodically so each position is equally weighted. DWA believes the design of the index allows them to identify major themes in the market, have exposure to those sectors whose price action is superior to others in the universe and eliminate exposure to those sectors whose price action is sub-par relative to others in the universe.
Tom Dorsey, President & CEO of Dorsey, Wright & Associates, said: “This is a strategy that Dorsey Wright created and has maintained for years. I personally use the strategy in my portfolio as an important piece of the core. We are excited to continue our partnership with First Trust and to bring this strategy to investors in a single ETF, which is designed to track the newly created Dorsey Wright Focus Five Index.”
The fund has total annual fund operating expenses of 0.95%.