FCTR Profile
The First Trust Lunt U.S. Factor Rotation ETF is designed to offer investors a dynamic approach to U.S. equity markets by rotating between different investment factors based on a proprietary risk-adjusted relative strength methodology. The fund typically invests at least 90% of its net assets in the common stocks that constitute its underlying index, which is constructed to emphasize securities that demonstrate strong characteristics in one of four key factors: momentum, value, quality, and volatility. This factor rotation strategy allows the fund to adapt to changing market conditions by allocating assets to the factors that are expected to outperform.
The index that the ETF tracks is based on a methodology developed by Lunt Capital Management, which uses relative strength to assess the performance of various investment factors over time. By rotating among momentum, value, quality, and volatility, the fund aims to capitalize on shifts in market leadership, potentially enhancing returns while managing risk. This approach contrasts with static allocation strategies, where exposure to specific factors remains constant regardless of market conditions. The dynamic nature of this ETF provides investors with the flexibility to benefit from different phases of the market cycle.
Momentum investing seeks to capitalize on the persistence of trends, while value investing focuses on acquiring stocks that are undervalued relative to their intrinsic worth. Quality investing prioritizes companies with strong financials, and low-volatility investing aims to reduce risk by selecting stocks with more stable price movements. By incorporating these diverse factors into its rotation strategy, the First Trust Lunt U.S. Factor Rotation ETF offers a multifaceted approach to equity investing, blending growth potential with risk management.
As a non-diversified fund, the ETF may concentrate its investments in a limited number of issuers, potentially leading to greater volatility compared to more diversified funds. However, this concentrated approach allows the fund to take more significant positions in securities that exhibit favorable factor characteristics, which can enhance the potential for outperformance. Investors in the First Trust Lunt U.S. Factor Rotation ETF gain exposure to a sophisticated investment strategy that seeks to optimize returns by dynamically adjusting to market trends and conditions, making it a compelling option for those looking to leverage factor-based investing in their portfolios.
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