Designed to provide broad exposure to the Asia-Pacific (Developed) ETFs category of the market, the First Trust Japan AlphaDEX ETF (FJP) is a smart beta exchange traded fund launched on 04/18/2011.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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
FJP is managed by First Trust Advisors, and this fund has amassed over $200.95 million, which makes it one of the average sized ETFs in the Asia-Pacific (Developed) ETFs. FJP seeks to match the performance of the NASDAQ AlphaDEX Japan Index before fees and expenses.
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.
Annual operating expenses for this ETF are 0.80%, making it one of the most expensive products in the space.
It's 12-month trailing dividend yield comes in at 3.31%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
When you look at individual holdings, Mitsubishi Heavy Industries, Ltd. (7011.JP) accounts for about 2.16% of the fund's total assets, followed by Nippon Yusen K.k. (9101.JP) and Mitsui O.s.k. Lines, Ltd. (9104.JP).
FJP's top 10 holdings account for about 18.36% of its total assets under management.
Performance and Risk
The ETF has added about 8.70% and is up about 12.39% so far this year and in the past one year (as of 12/06/2024), respectively. FJP has traded between $46.62 and $55.30 during this last 52-week period.
The ETF has a beta of 0.63 and standard deviation of 20.14% for the trailing three-year period, making it 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 $12.13 billion in assets, iShares MSCI Japan ETF has $14.22 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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Get it free >>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
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
