First Trust launches actively managed EM equity ETF

Jun 16th, 2016 | By | Category: Equities

ETF Strategy events are back! Please join us for breakfast briefings on Digital Assets & the Blockchain Economy on Thursday 2nd September 2021 (08:15-11:00) and Thematic Investing on Friday 3rd September 2021 (08:15-11:15) both at Yauatcha City, Broadgate Circle, London. Sponsors include First Trust, GHCO, MSCI, Rize ETF, VanEck and WisdomTree.


Exchange-traded fund provider First Trust Advisors has launched the First Trust RiverFront Dynamic Emerging Markets ETF (Nasdaq: RFEM), an actively managed ETF sub-advised by RiverFront Investment Group offering capital appreciation through exposure to emerging market economies.

First Trust launches RiverFront Dynamic Emerging Markets ETF

As of 15 June 2016 the fund has significant country exposure to South Korea (pictured) (23.3%), Taiwan (17.9%), China (13.6%), Brazil (10.1%) and India (9.0%)

Riverfront’s investment approach involves a quantitative and qualitative ranking system based on factors that include value, quality and momentum. These rankings are combined with RiverFront’s optimization process while the firm also uses currency hedging and risk management overlays.

Michael Jones, Chairman and Chief Investment Officer of RiverFront, commented in a statement: “We believe that active management is essential in today’s fast-moving markets, and this ETF offers active management of the underlying equity portfolio and a dynamic approach to currency hedging.”

Chris Konstantinos, RiverFront’s Director of International Portfolio Management, added: “We believe that emerging markets currently offer compelling equity valuations. As commodity prices stabilize and China continues its economic transition, the emerging countries that can successfully navigate this environment have meaningful upside potential in the coming years. We believe the wide divergence in political and economic environments across the emerging markets makes a discipline of active management around these opportunities and risks quite compelling.”

“Emerging market equities are dynamic and quickly-evolving, brimming with both opportunities and risks. We believe this actively managed ETF may provide significant advantages versus ETFs tracking traditional beta benchmarks, particularly when it comes to security selection, asset allocation, and managing currency risk,” said Ryan Issakainen, CFA, Senior Vice President, ETF Strategist at First Trust.

The fund is the fourth First Trust ETF to be sub-advised by RiverFront, who also oversee the First Trust RiverFront Dynamic Europe ETF (Nasdaq: RFEU), the First Trust RiverFront Dynamic Asia Pacific ETF (Nasdaq: RFAP), and the First Trust RiverFront Dynamic Developed International ETF (Nasdaq: RFDI).

Speaking of the benefits of ETFs compared to other investment vehicles, Jones said: “We believe financial advisors are seeking actively managed ETF portfolios that make greater use of the inherent tax advantages of the ETF structure and traditionally lower cost relative to actively managed mutual funds. RiverFront is especially proud to be collaborating with First Trust on these innovative investment solutions.”

As of 15 June 2016 the fund has 291 holdings with significant country exposure to South Korea (23.3%), Taiwan (17.9%), China (13.6%), Brazil (10.1%) and India (9.0%). The largest sector exposures are to information technology (26.1%), financials (24.5%), consumer discretionary (10.5%), consumer staples (8.3%) and materials (7.2%). The largest single holdings are Samsung (8.8%), Taiwan Semiconductor Manufacturing (8.6%) and Tencent Holdings (3.9%).

A total expense ratio (TER) of 0.95% applies.

The fund will be competing with a number of passive ETFs that track emerging market equity indices. The two largest in the US are the Vanguard FTSE Emerging Markets ETF (VWO) and the iShares MSCI Emerging Markets ETF (EEM) which have over $35bn and $21bn in assets under management respectively. VWO has a TER of 0.15% while EEM has a TER of 0.69%. Both funds have returned 2.4% year-to-date (15 June 2016).

Tags: , , , , , , , , , ,

Leave a Comment