First Trust, one of the largest issuers of smart beta exchange-traded funds, last week introduced six ETFs based on the Nasdaq Riskalyze indexes.
Those benchmarks “are designed to provide diversified, value-added exposure to broad equity market categories. The indexes seek to outperform their cap-weighted benchmarks, while maintaining low tracking error by neutralizing sector and/or country exposures versus the benchmark,” according to Illinois-based First Trust.
The six new ETFs from First Trust include four US-focused funds, an ex-U.S. developed markets product and an emerging markets ETF.
U.S. ETFs And A Dividend Fund
The US Equity Dividend Select ETF NASDAQRNDV is the new dividend offering from First Trust. That new ETF tracks the Nasdaq Riskalyze US Equity Dividend Select Index, which features stocks from the Nasdaq 500 Index which have paid dividends over the past year and yield more than the Nasdaq 500.
RNDV holds 124 stocks and allocates almost 36 percent of its combined weight to consumer discretionary and technology stocks.
The Large Cap US Equity Select ETF NASDAQRNLC is the large-cap U.S. ETF that follows the Nasdaq Riskalyze methodology. RNLC also draws from the Nasdaq 500 Index and also mandates that members firms paid a dividend over the past 12 months.
The new ETF holds 400 stocks, over 20 percent hail from the technology sector. Consumer discretionary and healthcare names combine for almost 29 percent of the new ETF’s weight. The Mid Cap US Equity Select ETF NASDAQRNMC and the Small Cap US Equity Select ETF NASDAQRNSC are the mid-cap and small-cap counterparts to RNLC.
RNSC’s universe is culled from the Nasdaq US 700 Small Cap Index while RNMC holdings come from the Nasdaq 600 Mid Cap Index.
The Developed International Equity Select ETF NASDAQRNDM tracks the Nasdaq Riskalyze Developed International Equity Select Index. RNDM’s 75 holdings are ranked by trailing 12-month volatility.
Japan and the U.K. combine for a third of the new ETF’s geographic weight while Germany and France, the two largest Eurozone economies, combine for 18 percent. RNDM charges 0.65 percent per year, or $65 on a $10,000 investment.
The Emerging Markets Equity Select ETF NASDAQRNEM also features a low volatility weighting scheme and assigns weights “that are equal to the to the country and sector weights within the Nasdaq Emerging Markets Large Mid Cap Index. The index weighting methodology includes a maximum weight cap of 3 percent to prevent high concentrations among larger stock,” according to First Trust.
To obtain exposure to Indian and Russian stocks, the ETF uses other ETFs. China and Taiwan combine for 34 percent of RNEM’s roster.