The First Trust Growth Strength ETF (FTGS) debuted on 10/25/2022, and is a smart beta exchange traded fund that offers broad exposure to the market’s Style Box – Large Cap Growth category.
What are smart beta ETFs?
Market cap weighted indices were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indices provide a low-cost, convenient and transparent way to replicate market returns, and are a good choice for investors who believe in market efficiency.
On the other hand, some investors who believe that it is possible to beat the market by better stock selection choose to invest in another class of funds that track non-cap weighted strategies – popularly known as smart beta.
Non-cap weighted indices attempt to select stocks that have a superior potential for risk-return performance, based on specific fundamental characteristics, or a mix of other such characteristics.
Although this space offers investors many options, including simple equal-weighting, fundamental weighting and volatility/momentum based weighting methods, not all of these strategies are capable of delivering better results.
Fund Sponsor and Index
Because the fund has amassed more than $1.24 billion, this makes it one of the average-sized ETFs in the Style Box – Large Cap Growth. FTGS is managed by First Trust Advisors. FTGS seeks to match the performance of the Growth Strength Index, before fees and expenses.
The Growth Strength Index provides exposure to a mix of domestic equities with filters for liquidity, return on equity, long-term debt, revenue and cash flow growth.
Costs and other expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain the same, it is important for investors to pay attention to the expense ratio of an ETF.
Operating expenses on an annual basis for FTGS are 0.60%, making it one of the more expensive products in the sector.
FTGS’s trailing 12-month dividend yield is 0.09%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Fortunately, most ETFs are very transparent products that disclose their holdings on a daily basis.
The fund has the largest allocation to the information technology sector, representing 31% of the portfolio; Financial and healthcare are in the top three.
Considering individual holdings, United Therapeutics Corporation (UTHR) accounts for about 2.55% of the fund’s total assets, followed by Baker Hughes Company (Class A) (BKR) and F5, Inc. (FFIV).