First Trust Japan AlphaDEX Fund (FJP) seeks to track the NASDAQ AlphaDEX Japan Index, which selects and weights Japanese stocks based on fundamental growth and value factors rather than market capitalization. This Japan-focused equity ETF provides exposure to companies exhibiting strong earnings growth, sales growth, and attractive valuation metrics.
How It Works
FJP uses a rules-based, fundamentally-weighted approach that screens Japanese stocks using growth factors (sales growth, earnings growth) and value factors (book value-to-price, cash flow-to-price). Selected stocks are equally weighted within sectors and rebalanced quarterly to maintain factor exposure. The fund typically holds 200-300 Japanese companies across all market capitalizations, with no currency hedging, meaning returns fluctuate with yen-dollar exchange rates.
Key Features
- Factor-based weighting system targets Japanese companies with superior growth and value characteristics versus traditional cap-weighted Japan ETFs
- Quarterly rebalancing maintains exposure to fundamental factors while reducing concentration risk through equal sector weighting methodology
- Provides 2.14% dividend yield from Japanese companies without currency hedging, offering pure yen exposure for diversification
Risks
- This ETF can lose significant value during Japanese market downturns or yen weakness, potentially declining 20-30% in bear markets
- Currency risk means returns fluctuate with yen-dollar exchange rates, adding 10-15% annual volatility beyond underlying stock performance
- Factor tilts toward growth and value stocks may underperform during periods favoring momentum or quality characteristics in Japanese markets
Who Should Own This
Best suited as a satellite holding (5-15% of international allocation) for investors with 3+ year time horizons seeking factor-based Japanese equity exposure. High risk tolerance required due to single-country concentration and currency volatility. Appropriate for investors wanting alternatives to cap-weighted Japan ETFs or building diversified international factor portfolios.