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The First Trust Value Line Dividend Index Fund among Smart Beta Funds

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Nov. 10 2015, Updated 4:08 p.m. ET

Popularity of high-yielding smart beta funds

The use of smart beta funds for investments has increased considerably during 2015. Almost $2.1 trillion is invested in smart beta funds as of November 5, 2015. Smart beta funds are one of the fasting-growing asset classes in the world, even though they tend to be smaller in size than other funds. Smart beta funds target low-cost profitable investment and try to achieve this by using the hybrid methodology of passive and active management approaches.

According to a survey done by Invesco, nearly two-thirds of institutional investors are likely to increase their use of smart beta ETFs over the next three years. Already, among different types of smart beta funds, high-dividend funds are the most widely used.

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Unique investment method

The First Trust Value Line Dividend Index Fund (FVD) seeks to replicate the investment result of the Value Line Dividend Index. This underlying index selects only those stocks that have the capability to generate dividends and have the potential for capital appreciation.

The total annual return of the First Trust Value Line Dividend Index Fund YTD in 2015 (as of November 5) was 5.6%, with an expense ratio of 1.28%. In this sense, FVD is a pure equity fund and hence has a very high-risk level. BOK Financial Corporation (BOKF), Chevron Corporation (CVX), Kellogg Company (K), and Altria Group (MO) are some of the top holdings of FVD.

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