First Trust Global Portfolios Limited (FTGP) announced the launch of the first actively managed foreign exchange ETF in Europe. The new First Trust FactorFX Ucits ETF (FTFX) available on the London Stock Exchange (LSE) on 1st August, will hold a basket of between 20 to 30 currency pairs in developing and emerging markets through forward FX contracts, futures, money market instruments and short-dated sovereign debt and will complement the FTGP fundamentally-weighted AlphaDEX fund range.
This new and innovative active ETF, targeted at wealth managers, DFMs, advisers and institutional investors, applies two risk premia – value and momentum – to the carry trade in currency markets. FTFX goes long on undervalued currencies and higher-yielding currencies, and goes short on overvalued, lower-yielding currencies, aiming to deliver total returns by focusing on the yield differential. It also seeks exposure to currencies displaying positive momentum – and avoids negative momentum currencies.
“Currency is an asset class, and an extremely liquid one,” said portfolio manager Leonardo DaCosta. “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.”