First Trust rolls out European smart beta ETFs to Swiss Exchange

Jan 30th, 2017 | By | Category: Equities

First Trust has listed two smart beta exchange-traded funds on SIX Swiss Exchange, offering multi-factor exposure to eurozone and Swiss equities. The move marks First Trust’s premier ETF launches on the Swiss market.

First Trust rolls out European smart beta ETFs to Swiss Exchange

First Trust’s AlphaDEX methodology selects stocks based on fundamental value and growth factors in an effort to outperform broad market cap-weighted indices.

Each ETF employs the rules-based AlphaDEX stock selection methodology whereby fundamental valuation factors are used to select and weight stocks. The process seeks correlation and risk characteristics similar to broad market cap-weighted indices while also pursuing outperformance.

The methodology uses two pillars, fundamental value and growth factors, to select stocks based on their potential for long-term capital gains.

The value pillar analyses firms based on a combination of their price-to-book ratio, price-to-cash flow ratio, and return on assets, effectively determining whether the stock may be considered cheap relative to fundamental factors, and also providing an indication of the quality of assets on the balance sheet.

The growth pillar scores stocks on five separate metrics: three-month price appreciation, six-month price appreciation, twelve-month price appreciation, one-year sales growth, and the price-to-sales ratio. The aim is to rank stocks according to their price momentum factor as well as provide a measure of fundamental growth.

A modified equal-weighting scheme is used to prevent over concentration in individual firms while tilting in favour of companies that scored impressively according to the AlphaDEX methodology.

Eric Anderson, Senior Vice President for Europe at First Trust Advisors said: “We are very excited to bring our first listing to Switzerland. SIX Swiss Exchange is one of the most important trading venues in Europe, and is a critical exchange for providing access to ETFs both inside and outside of Switzerland. We are also excited to be bringing this listing which offer investors fundamentally weighted exposure to critical markets such as Switzerland.”

The First Trust Eurozone AlphaDEX UCITS ETF (SIX: FEUZ) trades in Swiss francs and is also available on the London Stock Exchange in US dollar and British pound trading lines, as well as on Euronext Amsterdam in euros. It has a total expense ratio (TER) of 0.65%.

The fund tracks the NASDAQ AlphaDEX Eurozone Index. German and French equities collectively make up approximately half of the index constitution while stocks from Spain and Italy each contribute around 9% of the index’s performance.  The largest sector exposures are materials (approx. 20%), consumer discretionary and industrials (18% each), and financials (15%). There are 149 holdings in the fund.

The First Trust Switzerland AlphaDEX UCITS ETF (SIX: FTSZ) tracks the NASDAQ AlphaDEX Switzerland Index and has a TER of 0.65%.

The fund is more concentrated with 40 holdings and is predominantly invested in the financials and industrials sectors, each contributing approximately a quarter of the fund’s performance. Information technology and healthcare are the next largest sectors with roughly 9% weighting each.

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