ETF provider and asset manager First Trust Advisors (First Trust) has launched the First Trust Lunt US Factor Rotation ETF (FCTR).
The fund seeks investment results that correspond generally to the price and yield of the Lunt Capital Large Cap Factor Rotation Index, which is designed to provide exposure to US large cap equities, rotating among select factors when they come into favour using the propriety risk-adjusted relative strength methodology from Lunt Capital Management. The index rotates among eight sub-indices, each of which exhibits the characteristics of the high and low side of four factors.
Factor-based investing is a strategy used to choose securities based on those factors which are associated with historically higher returns.
“In recent years, the investment industry has highlighted the value of single and multi-factor investment solutions. The fund embraces a multi-factor approach with the important innovation of applying factor rotation to momentum, quality, value, and volatility,” says John Lunt, President, Lunt Capital. Factor-based strategies attempt to offer exposure to securities which target a desired deviation from the risk-return profile relative to the broader market. Although single-factor investing offers the ability to hone in on a desirable characteristic of a stock, a multi-factor approach may provide the added benefit of diversification and provide a solution that seeks to enhance returns over time.
“We are very pleased to join First Trust in launching the First Trust Lunt US Factor Rotation ETF. First Trust and Lunt Capital both have a history of innovation, which made it a natural fit to work together in the next evolution of factor investing – multi-factor rotation.”