Is First Trust Japan AlphaDEX ETF (FJP) a Strong ETF Right Now?
A smart beta exchange traded fund, the First Trust Japan AlphaDEX ETF (FJP) debuted on 04/18/2011, and offers broad exposure to the Asia-Pacific (Developed) ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. FJP has been able to amass assets over $206.32 million, making it one of the average sized ETFs in the Asia-Pacific (Developed) ETFs. This particular fund, before fees and expenses, seeks to match the performance of the NASDAQ AlphaDEX Japan Index.
The NASDAQ AlphaDEX Japan Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ Japan Index.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With one of the most expensive products in the space, this ETF has annual operating expenses of 0.80%.
FJP's 12-month trailing dividend yield is 3.70%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Ebara Corporation (6361.JP) accounts for about 2.32% of the fund's total assets, followed by Lawson, Inc. (2651.JP) and Nomura Holdings, Inc. (8604.JP).
FJP's top 10 holdings account for about 18.63% of its total assets under management.
Performance and Risk
The ETF has gained about 6.49% so far this year and it's up approximately 20.72% in the last one year (as of 05/08/2024). In the past 52-week period, it has traded between $44.87 and $55.30.
FJP has a beta of 0.66 and standard deviation of 18.66% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 102 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Japan AlphaDEX ETF is a reasonable option for investors seeking to outperform the Asia-Pacific (Developed) ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
JPMorgan BetaBuilders Japan ETF (BBJP) tracks MORNINGSTAR JAPAN TRGT MRKT EXPOSURE ID and the iShares MSCI Japan ETF (EWJ) tracks MSCI Japan Index. JPMorgan BetaBuilders Japan ETF has $11.52 billion in assets, iShares MSCI Japan ETF has $16.86 billion. BBJP has an expense ratio of 0.19% and EWJ charges 0.50%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Asia-Pacific (Developed) ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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First Trust Japan AlphaDEX ETF (FJP): ETF Research Reports
iShares MSCI Japan ETF (EWJ): ETF Research Reports
JPMorgan BetaBuilders Japan ETF (BBJP): ETF Research Reports
