First Trust Developed Markets ex-US AlphaDEX Fund (FDT) seeks to track the NASDAQ AlphaDEX Developed Markets ex-US Index, which selects and weights international stocks from developed countries (excluding the U.S.) based on growth and value factors rather than market capitalization, targeting undervalued companies with strong fundamentals.
How It Works
FDT employs a rules-based, quantitative approach that screens developed market stocks using growth factors (sales growth, one-year sales growth) and value factors (book value-to-price, cash flow-to-price). Selected stocks are equally weighted within sectors and rebalanced quarterly. This active indexing methodology typically results in 200-400 holdings with higher allocations to mid-cap stocks compared to traditional market-cap weighted international funds.
Key Features
- AlphaDEX methodology targets stocks with superior growth and value characteristics, potentially outperforming traditional cap-weighted international indexes
- Equal weighting within sectors reduces concentration risk and provides more balanced exposure across company sizes
- 3.00% dividend yield offers attractive income potential from international dividend-paying companies
Risks
- This ETF can lose value if the AlphaDEX factor methodology underperforms, as quantitative strategies may fail during certain market conditions
- Currency fluctuations can significantly impact returns when foreign currencies weaken against the U.S. dollar, reducing fund value
- International developed markets can decline 40-50% during global recessions, with additional volatility from geopolitical events affecting European and Asian markets
Who Should Own This
Best suited as a satellite holding (10-25% of equity allocation) for investors with 3+ year time horizons seeking international diversification with factor tilts. Medium-to-high risk tolerance required due to currency and factor strategy volatility. Appeals to investors wanting alternatives to traditional cap-weighted international exposure.