UK-based investment management company First Trust Global Portfolios (FTGP) has launched the first actively-managed foreign exchange ETF in Europe.
The new First Trust FactorFX Ucits ETF will hold a basket of between 20 to 30 currency pairs in developing and emerging markets through forward foreign contracts, futures, money market instruments and short-dated sovereign debt and will complement the FTGP fundamentally-weighted AlphaDEX fund range.
The new ETF, targeted at wealth managers, advisers and institutional investors applies two risk premia – value and momentum – to the carry trade in currency markets.
FGTP said the new ETF will go long on undervalued currencies and higher-yielding currencies, and short on overvalued, lower-yielding currencies, aiming to deliver total returns by focusing on the yield differential.
The fund will also seek exposure to currencies displaying positive momentum and avoid negative momentum currencies.
Leonardo DaCosta, portfolio manager at First Trust, said: “Currency is an asset class, and an extremely liquid one.
“By focusing on the yield differential of currency pairs, the fund can potentially generate total returns in a world of compressed yields, and is a great way to add portfolio diversification.”
The Irish-domiciled Ucits ETF is denominated in US dollars and has a total expense ratio of 0.75%.
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