First Trust launches multi-manager large-cap growth ETF

Jul 22nd, 2020 | By | Category: Equities

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First Trust has launched an actively managed ETF that employs a multi-manager approach in a bid to outperform the US large-cap growth market.

Ryan Issakainen, Senior Vice President, ETF Strategist at First Trust.

Ryan Issakainen, Senior Vice President, ETF Strategist at First Trust.

The First Trust Multi-Manager Large Growth ETF (MMLG US) has listed on NYSE Arca and comes with an expense ratio of 0.85%.

First Trust, in its role as advisor, is responsible for the selection and ongoing monitoring of the securities in the ETF; however, the fund’s investment strategy will be driven by model portfolios supplied by third-party asset managers that act as sub-advisors.

The potential advantage of a multi-manager approach is that the fund benefits from diversified expertise from several asset management firms, each of whom offers its own experience, philosophy, and strategy.

Disadvantages of the multi-manager approach can include an additional layer of expense, a greater requirement for portfolio monitoring, and potentially higher rebalancing needs.

The assets of the fund will initially be allocated equally between two sub-advisors – Wellington Management and Sands Capital. First Trust will move to rebalance the ETF if one sub-advisor accounts for more than 60% of the fund’s assets.

Ryan Issakainen, Senior Vice President, ETF Strategist at First Trust, commented, “We are thrilled to work with best-in-class large-cap growth managers, which have demonstrated a long-term history of success, by employing distinct, complementary investment philosophies.

“By combining multiple large-cap growth strategies that have the potential to perform well in different market environments, this ETF seeks to produce more consistent alpha over time.”

Wellington Management’s investment approach seeks out companies with robust quality fundamentals that are undervalued based on earnings and cash flow ratios. The portfolio will generally have a lower beta profile compared to the Russell 1000 Growth Index.

Sands Capital seeks to identify high-quality, wealth-creating growth businesses using a fundamental research approach. The firm analyzes six key factors to narrow the investable universe: sustainable above-average earnings growth; leadership position in a promising business space; significant competitive advantages in a particular segment of the market; clear mission and value-added focus; financial strength; and rational valuation relative to the market and business prospects.

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