First Trust FactorFX UCITS ETF

Issuer: First Trust

Asset Class: Currency

TER: 75bps

Trading Currency: GBX

Pays Income: False

Listing Date: 04 Dec 2017

Ticker: FXGB

ISIN: IE00BD5HBR05

This actively managed fund offers a systematic approach to the global currency markets, aiming to generate positive total returns regardless of the direction of broader equity or bond markets. It employs a quantitative, factor-based strategy designed to capture structural risk premia within foreign exchange. The strategy is built on the academic principle that certain characteristics can systematically explain and predict currency returns over time. By moving beyond simple directional bets on currencies, the fund seeks to provide a source of returns that has a low correlation to traditional asset classes, making it a potentially valuable tool for portfolio diversification.

The core of the investment process involves building a diversified, long/short portfolio based on three distinct and well-researched factors: carry, momentum, and value. The carry strategy involves buying currencies with high interest rates and selling those with low rates. The momentum factor capitalizes on established trends by buying currencies that have recently performed well and selling those that have performed poorly. Finally, the value component seeks to identify and exploit mispricings by purchasing currencies deemed undervalued and shorting those considered overvalued, often based on purchasing power parity. The portfolio is constructed by combining exposures from both G10 and liquid emerging market currencies, aiming for a balanced and risk-managed approach.