When it comes to its line of top-performing ETFs, First Trust appears to be operating under the philosophy of “slow and steady wins the race.” And it’s paying off.
At the end of 2008, First Trust had $800 million in assets under management and was one of the smaller ETF providers. Those days are a distant memory: At the end of April 2010, the provider boasted $3.1 billion in assets under management and is now just outside the industry’s top 10 list.
If the provider’s funds continue to reside near the top of performance charts, top 10 may not be far off. ETFs like KEYnotes First Trust Enhanced 130/30 Large-Cap ETN (NYSEARCA:JFT) and First Trust NYSE Arca Biotech Index (NYSEARCA:FBT) are some of the provider’s top-performing funds year-to-date. FBT, in fact, leads all other biotechnology ETFs, up 14.8% year-to-date.
The Firm’s History
First Trust is not a newcomer to the investment world. The company was established in 1991, getting its start as a unit investment trust (UIT) sponsor and spent most of its first decade doing that, according to Dan Waldron, First Trust’s head of ETFs.
“In the last five or six years, we started to expand aggressively into other types of products,” he says, including ETFs in 2005. Waldron says that the first ETF was more of a “testing of the waters,” and that a full play for the ETF market was made by First Trust in 2007. Today, they have 43 ETFs.
Standing Out in the Crowd
“If there’s a word to describe the ETF market,” Waldron says, “it’s crowded.”
Since entering the business, the iShares and State Streets of the world have become fully entrenched in the ETF market space. As new players enter, they’re staking out their own corners of the market and that’s what First Trust is doing.
“We’re trying to find our own beachhead and we believe in the core domestic categories for alpha,” he says. “We sort of jumped the curve and jumped right into alpha looking at things like large-cap core and small-cap core.”
Waldron admits feeling frustration as other “hot” concepts like emerging markets and leveraged and inverse funds took huge inflows, but sticking to what they do best – domestic equities – has finally paid off.
“We feel completely vindicated. The headwinds have turned into tailwinds and the performance of domestic equities has turned around,” he says. “We feel good about our position in the industry.”
Some of First Trust’s biggest ETFs are:
- First Trust ISE-Revere Natural Gas Index (NYSEARCA:FCG)
- First Trust NASDAQ -100 Tech Index (NASDAQ:QTEC)
- First Trust ISE Chindia Index (NYSEARCA:FNI)
- First Trust Materials AlphaDEX (NYSEARCA:FXZ)
- First Trust Financials AlphaDEX (NYSEARCA:FXO)