US asset management house First Trust Advisors is looking to enter the UK market in the coming months with the launch of its family of “intelligent” exchange-traded funds.
The company, which runs $9.3bn (£5.94bn) in its US-based ETFs, is seeking regulatory approval to list three of its “enhanced” AlphaDEX ETFs during the next quarter. The group plans to grow the range to include as many of its 39 AlphaDEX ETFs as possible.
First Trust managing director Dan Lindquist says the products are aimed at investors who have only had access to traditional, index-based ETFs and want to focus on the companies that have the strongest investment merit.
The AlphaDEX range uses a rules-based stock selection method to add alpha to the products’ underlying indices. Stocks are chosen and weighted with a view to their investment characteristics, with the underlying index rebalanced quarterly to reflect changing conditions.
The asset manager says this approach combines the benefits of index-based ETFs, such as daily trading, transparency and lower costs, with the advantages of active management, such as outperformance.
Lindquist says: “Although the traditional parts of the ETF market are saturated, we believe there is room for innovation – particularly if there is intelligence in that innovation.”
The company has set up a London-based subsidiary, First Trust Global Portfolios, to oversee the distribution of the ETFs and any other future products across the UK and Europe.
Page Russell director Tim Page says: “A very small proportion of clients ask about traditional ETFs and I suspect an even smaller proportion would know about actively-managed ETFs.”