First Trust launches international (ex US) internet ETF

Nov 12th, 2018 | By | Category: Equities

First Trust Advisors has unveiled the First Trust Dow Jones International Internet ETF (FDNI US) on Nasdaq Exchange.

First Trust launches international complement to Dow Jones internet ETF

The fund provides exposure to developed and emerging market stocks that derive a majority of their revenue from internet-based activities.

The fund tracks the Dow Jones International Internet Index, providing exposure to the 40 largest and most actively traded companies outside of the US that generate a majority of their revenue from internet-based activities.

According to First Trust, the fund offers investors a means to tap into the growth potential of international companies that stand to benefit from the rapidly developing “Internet of Things” theme – the expansion of the network of connected devices to include vehicles and everyday items such as home appliances.

Stocks are drawn from the S&P Global ex-US Broad Market Index and must pass both size and liquidity tests, possessing a float-adjusted market capitalization of at least $1 billion and a six-month median daily traded volume of at least $5 million.

The index methodology selects the 20 largest firms from the Internet Commerce industry segment and the 20 largest from Internet Services.

The index is weighted by float-adjusted market capitalization with an individual security cap of 10%. Reconstitution and rebalancing occur quarterly.

The fund has a significant leaning towards China, making up over half (51.8%) of the total exposure and contributing the fund’s top five holdings. The top three – Alibaba, Tencent, and Baidu – are each around the 10% weight cap.

It also has notable exposure to stocks listed in South Korea (9.5%), Japan (9.4%), the UK (7.5%), and Canada (5.3%).

In terms of sectors, the largest exposure is to the newly created communication services sectors, with a weight of 55.0%, followed by consumer discretionary stocks (34.8%) and information technology (7.2%).

The fund comes with an expense ratio of 0.65%.

The fund complements the existing First Trust Dow Jones Internet Index ETF (FDN US), which was launched in 2006 and holds $8.2 billion in assets. FDN applies the same investment process to the universe of US-listed equities. Constituents include well-known technology giants such as Amazon, Facebook, Netflix, Paypal, Alphabet (parent of Google), Twitter, and eBay. It has an expense ratio of 0.53%.

“The internet continues to be one of the most disruptive forces in the global economy, fuelling growth by increasing efficiency in many different industries,” said Ryan Issakainen, Senior Vice President, ETF Strategist at First Trust. “Just as the First Trust Dow Jones Internet Index Fund provides exposure to US ecommerce and internet services stocks, this new ETF does so for international developed and emerging markets, where we see potential for robust revenue growth.”

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