An index-tracking ETF based on Dorsey Wright’s
systematic momentum strategy with the ability to allocate to cash
equivalents
First Trust Advisors L.P. (“First Trust”) expects to launch a
new exchange-traded fund (“ETF”), the First Trust Dorsey Wright
Dynamic Focus 5 ETF (Nasdaq: FVC), on March 18, 2016. The fund
seeks investment results that correspond generally to the price and
yield (before the fund’s fees and expenses) of an index called the
Dorsey Wright Dynamic Focus Five Index (the “index”).
The index is owned and was developed by Dorsey, Wright &
Associates (“DWA”). DWA is a registered investment advisory firm
that provides professional management of equity portfolios for
investors and investment research services for numerous
broker/dealers and large institutions around the world. Technical
analysis provides the cornerstone of their approach and relative
strength plays a very important role.
The index is designed to provide targeted exposure to five First
Trust sector and industry based ETFs as identified by DWA’s
proprietary relative strength methodology. This methodology is a
ranking system used to measure a security’s price momentum relative
to its peers and helps DWA identify meaningful patterns in daily
share price movements. If an ETF’s price consistently rises faster
than its peers, the index relies on DWA’s belief that the trend
could continue. Additionally, the index has the potential to
allocate to 1- to 3-month U.S. Treasury bills represented by the
Nasdaq US T-Bill Index (the “cash index”). The index allocates to
the cash index when the relative strength of more than one-third of
the universe of First Trust ETFs begins to diminish relative to the
cash index. The index seeks to identify major themes in the market,
have exposure to those sectors whose price action is superior to
others in the universe, and eliminate exposure to those sectors
whose price action is sub-par to others in the universe. In
instances where relative strength diminishes across equity sectors,
the index gains varying amounts of exposure to the cash index.
“The First Trust Dorsey Wright Dynamic Focus 5 ETF provides a
simplified way for financial advisors and their clients to gain
exposure to a sector rotation strategy with the ability to allocate
to cash equivalents. Dorsey Wright’s research on relative strength
is widely followed and we are pleased to offer this fund which
tracks an index that combines their insights with First Trust’s
lineup of sector and industry ETFs,” said Ryan Issakainen, CFA,
Senior Vice President, Exchange-Traded Fund Strategist at First
Trust.
For more information about First Trust, please contact Ryan
Issakainen of First Trust at (630) 765-8689 or
RIssakainen@FTAdvisors.com.
About First Trust
First Trust Advisors L.P., along with its affiliate First Trust
Portfolios L.P., are privately held companies which provide a
variety of investment services, including asset management and
financial advisory services, with collective assets under
management or supervision of approximately $90.63 billion as of
February 29, 2016 through unit investment trusts, exchange-traded
funds, closed-end funds, mutual funds and separate managed
accounts. First Trust is based in Wheaton, Illinois. For more
information, visit http://www.ftportfolios.com.
You should consider the fund’s investment objectives, risks,
and charges and expenses carefully before investing. Contact First
Trust Portfolios L.P. at 1-800-621-1675 to obtain a prospectus or
summary prospectus which contains this and other information about
the fund. The prospectus or summary prospectus should be read
carefully before investing.
ETF Characteristics
The fund lists and principally trades its shares on The Nasdaq
Stock Market LLC.
The fund’s return may not match the return of the Dorsey Wright
Dynamic Focus Five Index. The ETFs held by the fund will generally
not be bought or sold in response to market fluctuations.
Investors buying or selling fund shares on the secondary market
may incur customary brokerage commissions. Market prices may differ
to some degree from the net asset value of the shares. Investors
who sell fund shares may receive less than the share’s net asset
value. Shares may be sold throughout the day on the exchange
through any brokerage account. However, unlike mutual funds, shares
may only be redeemed directly from the fund by authorized
participants, in very large creation/redemption units.
Risks
The fund’s shares will change in value, and you could lose money
by investing in the fund. One of the principal risks of investing
in the fund is market risk. Market risk is the risk that a
particular ETF owned by the fund, fund shares or stocks in general
may fall in value. There can be no assurance that the fund’s
investment objective will be achieved.
The ETFs in which the fund invests invest in equity securities
and the value of the fund’s shares will fluctuate with changes in
the value of these equity securities.
The ETFs in which the fund invests are likely to be concentrated
in a single industry or sector. An ETF concentrated in a single
industry or sector presents more risks than a fund that is broadly
diversified over several industries or sectors.
The ETFs in which the fund invests may invest in small
capitalization and mid capitalization companies. Such companies may
experience greater price volatility than larger, more established
companies.
The fund may be subject to interest rate risk and income risk.
Interest rate risk is the risk that the value of the cash
equivalents in the fund will decline because of rising market
interest rates. Income risk is the risk that income from the fund's
portfolio could decline if interest rates fall.
The ETFs in which the fund invests may invest in securities of
non-U.S. issuers which are subject to additional risks, including
currency fluctuations, political risks, withholding, the lack of
adequate financial information, and exchange control restrictions
impacting non-U.S. issuers. These risks may be heightened for
securities of companies located in, or with significant operations
in, emerging market countries. The ETFs in which the fund invests
may invest in depositary receipts which may be less liquid than the
underlying shares in their primary trading market.
The index employs a “momentum” style methodology that emphasizes
selecting ETFs that have had higher recent price performance
compared to other ETFs. Momentum can turn quickly and cause
significant variation from other types of investments.
Pursuant to the methodology that the index employs, the fund may
own a significant portion of the First Trust ETFs included in the
index. Any such ETF may be removed from the index in the event that
it does not comply with the eligibility requirements of the index.
As a result, the fund may be forced to sell shares of certain First
Trust ETFs at inopportune times or for prices other than at current
market values or may elect not to sell such shares on the day that
they are removed from the index, due to market conditions or
otherwise.
The fund may invest in U.S. government obligations. U.S.
Treasury obligations are backed by the “full faith and credit” of
the U.S. government. Securities issued or guaranteed by federal
agencies and U.S. government sponsored instrumentalities may or may
not be backed by the full faith and credit of the U.S.
government.
The risks of owning an ETF generally reflect the risks of owning
the underlying securities, although lack of liquidity in an ETF
could result in it being more volatile and ETFs have management
fees that increase their costs.
The fund invests in securities of affiliated ETFs, which
involves additional expenses that would not be present in a direct
investment in such affiliated ETFs.
The fund currently has fewer assets than larger funds, and like
other relatively new funds, large inflows and outflows may impact
the fund's market exposure for limited periods of time.
The fund is classified as “non-diversified” and may invest a
relatively high percentage of its assets in a limited number of
issuers. As a result, the fund may be more susceptible to a single
adverse economic or regulatory occurrence affecting one or more of
these issuers, experience increased volatility and be highly
concentrated in certain issuers.
First Trust Advisors L.P. is the adviser to the fund. First
Trust Advisors L.P. is an affiliate of First Trust Portfolios L.P.,
the fund’s distributor.
The fund is not sponsored, endorsed, sold or promoted by Dorsey
Wright. Dorsey Wright makes no representation or warranty, express
or implied, to the owners of the fund or any member of the public
regarding the advisability of trading in the fund. Dorsey Wright’s
only relationship to First Trust is the licensing of certain
trademarks and trade names of Dorsey Wright and of the index, which
is determined, composed and calculated by Dorsey Wright without
regard to First Trust or the fund.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160317006230/en/
First TrustRyan Issakainen, (630)
765-8689RIssakainen@FTAdvisors.com
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