This Fast-Growing “Smart Bank” ETF Deserves A Closer Look

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March 31, 2017 12:06pm Nasdaq:FTXO

financial banks

FTXO (First Trust Nasdaq Bank, Expense Ratio 0.60%) is far from a well-known ETF, having only debuted late last September. But it has attracted an impressive over $870 million year-to-date via creation flows.


When we look at fund literature, FTXO is described as tracking the “Nasdaq U.S. Smart Banks Index,” which is described as follows:

“A modified factor weighted index created and administered by Nasdaq, Inc. designed to provide exposure to U.S. companies within the banking industry. Nasdaq selects the 30 most liquid eligible bank securities from the NASDAQ U.S. Benchmark Index and then ranks those securities based on three factors: 1) Volatility – trailing 12-month price fluctuation 2) Value – cash flow to price, 3) Growth – the 3-, 6-, 9-, and 12-month average price appreciation. The securities are weighted based on their score on the three factors. The index weighting methodology includes caps to prevent high concentrations among single stocks. The index is reconstituted annually and rebalanced quarterly.”

Our key takeaway from these statements is that this is far from a passively managed portfolio, as the index name “Smart Banks” would hint at, and the annual reconstitution that takes place gives the fund an opportunity to be constantly dynamic in including or excluding bank names that may or may not fit the investment criteria.

Thus, this is another “Smart Beta” product that clearly has garnered some interest and attention lately in gathering these notable assets year-to-date. Categorized as “Large Cap” within the greater Financial Equity sector, FTXO competes with other “Bank” ETFs such as KRE (SPDR S&P Regional Banking, Expense Ratio 0.35%, $3.4 billion in AUM), and KBE (SPDR S&P Bank, Expense Ratio 0.35%, $3.2 billion in AUM).

Thanks to strong asset growth since inception this fund is actually the third largest “Bank” ETF in terms of asset size in the U.S. listed landscape presently. When we look at current top holdings in FTXO we see the following: 1) JPM (8.18%), 2) RF (8.00%), 3) PNC (7.96%), 4) USB (7.89%), and 5) STI (7.85%). From a market cap standpoint Large Caps are well represented presently (70% of the portfolio), followed by lesser weightings to Mid-Caps (24%), and Small-Caps (6%).

FTXO-2017-03-31

The First Trust Nasdaq Bank ETF (NASDAQ:FTXO) was trading at $26.20 per share on Friday morning, down $0.08 (-0.30%). Year-to-date, FTXO has gained 0.77%, versus a 5.72% rise in the benchmark S&P 500 index during the same period.

FTXO currently has an ETF Daily News SMART Grade of NR (Not Rated), and is unranked among 38 ETFs in the Financial Equities ETFs category.


Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.


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