First Trust Advisors has launched a new actively managed US equity ETF targeting attractive growth-oriented stocks identified by the equity research team at investment bank Raymond James.
Ryan Issakainen, Senior Vice President, ETF Strategist at First Trust.
The FT Raymond James Multicap Growth Equity ETF (RJMG US) has been listed on NYSE Arca with an expense ratio of 0.85%.
Ryan Issakainen, Senior Vice President, ETF Strategist at First Trust, commented: “After a prolonged period of relatively strong performance by passive, market-cap weighted indices, we believe that stock selection may play a more important role for investors in the years ahead.
“In our opinion, the equity research team at Raymond James has a robust, time-tested process for uncovering relatively attractive stocks with solid fundamentals. We believe RJMG is an effective tool for investors to gain exposure to some of Raymond James’ highest conviction ideas.”
Investment approach
The equity research team at Raymond James analyzes an initial universe comprising roughly the 1,200 largest US-listed equity securities including real estate investment trusts (REITs).
The universe is reduced to those companies that Raymond James rates either as “Strong Buy,” indicating an expected total return of at least 15% and outperformance of the S&P 500 over the next 6-12 months, or “Outperform,” suggesting potential appreciation and outperformance over the next 12-18 months.
Raymond James further narrows down the eligible universe, focusing on reasonably priced companies that exhibit robust growth characteristics, as assessed through a blend of fundamental and quantitative metrics.
Around 40 securities are then selected and weighted approximately equally. This final stage of selecting and weighting securities in the portfolio is carefully managed to maintain approximate sector neutrality relative to the Russell 3000 Growth Index.
Raymond James regularly reviews the chosen constituents for any rating downgrades or corporate actions that might affect a stock’s future return potential, making necessary adjustments to the portfolio as needed. A general portfolio-level rebalancing occurs quarterly.
As of 19 January, stocks from the information technology sector accounted for well over a third (38.0%) of the portfolio weight with the next-largest sector exposures being consumer discretionary (14.7%), communication services (12.4%), and health care (10.2%).