First Trust to launch US equities ETF with quality tilt

Greg Guerin First Trust

First Trust has expanded its range with the launch of a US equities ETF which focuses on quality companies.

The First Trust Capital Strength UCITS ETF (FTCS) is listed on the London Stock Exchange with a total expense ratio (TER) of 0.60%.

FTCS mirrors one of First Trust’s first ETF strategies in the US, the $3.6bn First Trust Capital Strength ETF, which launched in 2006.

Tracking the Capital Strength index, FTCS offers investors to exposure to companies with strong balance sheets that exhibit lower volatility.

Rebalancing quarterly, the index begins by selecting the largest 500 companies from the Nasdaq US Benchmark index.

To be eligible for inclusion, companies out of the 500 must have at least $1bn in cash or short-term investments, a long-term debt to market cap ratio of less than 30% and a return of equity greater than 15%.

The qualifying securities are subsequently ranked by a combined short-term (3 months) and long term (one year) realised volatility.

The 50 securities with the lowest combined volatility score are included in the index, subject to a maximum of 30% from any sector based on the Industry Classification Benchmark.

Inside First Trust, the silent ETF powerhouse

Gregg Guerin (pictured), senior product specialist at First Trust, commented: “Over the last twenty-five years in times of market instability, quality and less volatile US equities have historically outperformed the S&P 500 Index in down months by 74% and 85% respectively.

“We are pleased to bring this rules-based strategy to market and believe FTCS offers advisers and wealth managers the potential for protecting in negative markets while participating in increasing markets.”

Last November, the firm launched an actively managed factor-based bond product, the First Trust Low Duration Global Government Bond UCITS ETF (FSOV).

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