First Trust Portfolios Canada


First Trust Portfolios Canada has been providing quality investment solutions to Canadian retail and institutional investors since 1996. The Canadian operation is part of a global investment management organization collectively referred to as First Trust and was established in 1991 with a mission to offer investors a better way to invest. Headquartered in Wheaton Illinois, First Trust currently has over $75 billion under administration providing a variety of investment products to both retail and institutional clients. With more than 500 employees worldwide, First Trust has a footprint in the U.S., Canada, Mexico and Europe, establishing its Canadian operations in 1996. Located in Toronto, First Trust Portfolios Canada creates investment products and provides sales and service capabilities across the country. With deep roots in the Canadian market, First Trust has established itself as a leading provider of unique and specialized products for investors.

In addition to bringing many actively managed mutual funds to the Canadian market, First Trust also collaborated with several of the major Canadian dealers including RBC Dominion Securities, Scotia McLeod and TD. “We created mutual funds that offered a one-ticket solution for investment advisors to gain access to their firm’s equity selections,” says Fraser Howell, President, FT Portfolios Canada Co.
In 2005, First Trust launched two closed-end funds raising nearly $300 million. With total assets under management approaching $1 billion, First Trust established itself as a leading investment fund manager in Canada.

In recent years, First Trust has focused its efforts on the growing Exchange Traded Funds industry and leveraging the success of the US parent company. “We have allocated significant resources have made a commitment to the Canadian business and look forward to providing the Canadian market place with innovative and differentiated ETF solutions,” say Howell.

Quantitative Approach Leads to Fundamentally Better ETFs

First Trust entered the US ETF industry in 2007 and is now one of the fastest growing ETF providers internationally. With almost 80 ETF solutions available in the US and nearly $16 billion in ETF assets, First Trust has doubled their assets this year alone. First Trust attributes its tremendous level of growth to its quantitative strategy called AlphaDEX™. This rules based fundamental stock selection approach applies a transparent and repeatable methodology that weights securities based on their investment merit (instead of size), thereby avoids potential drawbacks of market capitalization weighted indices.

The key benefit behind First Trust’s quantitative approach to portfolio construction is that it “takes the emotion and human subjectivity out of investing,” says Karl Cheong, Senior Vice Pre sident, Head of ETF Product Development with First Trust’s Canadian business. “Based on over 60 years of academic research, we have selected specific fundamental factors in our model which have demonstrated a consistent pattern of outperformance over time. We aim to provide investors with a differentiated and superior investment approach compared to traditional ETFs,” says Cheong.

“First Trust’s proprietary AlphaDEX™ methodology analyzes a combination of growth and value factors in a broad universe,” says Bobby Eng, Senior Vice President, Head of Sales for First Trust in Canada. “The growth factors include price momentum, sales growth and price to sales. Value factors include price to book, price to cash flow and return on assets. These factors have been predictive of outperformance based on academic research.”

The results of the AlphaDEX™ methodology have been extremely positive. “Approximately 75% of the AlphaDEX™ ETFs with a 5 year track record have outperformed their respective benchmark by an average of 3.3% as of Sept 30th, 2013. Our ETF assets have doubled from $8B to over $16B in 2013 alone which makes First Trust the 9th largest ETF provider in the United States,” says Eng. “This quantitative strategy we employ has worked and we have seen retail and institutional investors allocate more assets to the AlphaDEX™ methodology.”

The Future of First Trust in Canada

“Our goal is to be first to market with new products or provide enhancements to existing offerings,” says Cheong, “AlphaDEX™, for example, is an proprietary, fundamentally driven selection and weighting methodology that can be applied across a broad set of equities. We aim to bring new investment opportunities to Canadian investors.
First Trust’s initial ETF launch included First Trust AlphaDEX™ Canadian Dividend Plus ETF (FDY), First Trust AlphaDEX™ US Dividend Plus ETF (FUD) and First Trust AlphaDEX™ Emerging Markets Dividend ETF (FDE) which provide exposure to broad markets based on the AlphaDEX methodology with a dividend screen for income. The market has “welcomed the blending of active management in a passive ETF structure. We like to say our investors get alpha performance for beta fees” says Eng.

The most recent launch on August 28, 2013 was First Trust Senior Loan ETF (FSL), which is currently the only actively managed senior loan ETF in the Canadian market. The reception has been very positive and has gathered over $15 million as of the end of September.

These product innovations reflect First Trust’s continued commitment to providing high yield and low cost ETF solutions to Canadian investors.