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Popular ETF Of ETFs Gets Defensive After Market Slide

by
February 8, 2016 1:32 pm
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The First Trust Dorsey Wright Focus 5 ETF (NASDAQ: FV) is reportedly dumping some of its riskier holdings in favor of more conservative fare as the S&P 500 has tumbled eight percent year-to-date.

 

Since coming to market in March 2014, FV has held the same five First Trust industry and sector ETFs. Those funds are the First Trust NYSE Arca Biotechnology Index Fund (NYSE: FBT), First Trust Dow Jones Internet Index Fund (NYSE: FDN), First Trust Consumer Staples AlphaDEX Fund (NYSE: FXG), First Trust Health Care AlphaDEX Fund (NYSE: FXH) and the First Trust Consumer Discretionary AlphaDEX Fund (NYSE: FXD).

 

That was FV's lineup as of Feb. 4, according to First Trust data.

 

Citing market evidence and ETF market makers, Barron's reports FV made its first change last week, swapping out of FBT for the First Trust Utilities AlphaDEX Fund (NYSE: FXU). The change is welcome, but it probably also leaves FV investors wondering what took so long. 

 

FBT, the second-largest biotech ETF by assets, has lost a third of its value in the past six months and more than 24 percent in just the past month. Market data suggest the Barron's report about FV dumping FBT in favor of FXU is accurate. For example, FBT's volume swelled 17.1 million shares on Friday compared to the ETF's 90-day average of just over 531,300. FXU's Friday volume was a staggering 48.3 million compared to a 90-day average of less than 519,000 shares.

 

Though FV is considered a passively managed ETF, relative strength analysis of its constituent ETFs is conducted weekly, meaning if one (or more) of the holdings tumble enough, they can be removed from FV and replaced with other First Trust sector and industry funds displaying better relative strength traits.

 

FV, an ETF beloved by advisors and investors that are followers of Dorsey Wright's momentum-based, relative strength strategies, is home to over $3.6 billion in assets under management, making it one of the most successful ETFs to come to market in 2014. However, investors have pulled nearly $448 million from the ETF this year.


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