First Trust unveils ‘R&D Leaders’ US equity ETF

May 9th, 2024 | By | Category: Latest news

First Trust Advisors has launched a new thematic equity ETF in the US providing exposure to companies that consistently reinvest in their own growth.

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

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

The First Trust Bloomberg R&D Leaders ETF (RND US) has been listed on NYSE Arca with an expense ratio of 0.60%.

The fund is linked to the Bloomberg R&D Leaders Select Index which selects its constituents from an initial universe comprising the largest 1,000 stocks that are listed and domiciled in the United States.

The methodology screens for companies that have consistently increased their R&D expenditures over three consecutive years and possess R&D-to-sales ratios within the top 10% of the initial universe.

From the screened universe, the 50 largest stocks are selected and weighted according to float-adjusted market capitalization. The weighting caps the five largest companies at 8% each and any other company at 4%. Additionally, the exposure to any single sector is limited to 40%. The index undergoes quarterly rebalancing and semi-annual reconstitution.

As of 8 May, information technology stocks dominated with a combined weight of 41.1% with the next-largest sector exposures being consumer discretionary (17.7%), health care (15.5%), and communication services (12.3%).

Notable positions included Apple (8.5%), (8.3%), NVIDIA (8.0%), Microsoft (7.8%), Meta Platforms (7.8%), Alphabet (4.5%), Eli Lilly (4.0%), and Tesla (4.0%)

Ryan Issakainen, Senior Vice President and ETF Strategist at First Trust, commented: “Innovation is the critical engine of growth that powers the US economy. A common thread running through the most innovative companies is a commitment to research and development. To harness these waves of innovation, companies frequently invest resources to enhance existing products or processes in order to generate a future economic benefit. Over time, the continual growth of R&D expenditures may contribute to greater sales and net income growth for these businesses as compared to the market.

Allison Stone, Head of Multi-Asset Product at Bloomberg Index Services, added: “We built the Bloomberg R&D Leaders Select Index to provide investors with the opportunity to explore the specific theme of companies committed to growth through research & development prioritization. We are excited to grow our relationship with First Trust as they continue to deliver differentiated products for their clients.”

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