First Trust Latin America AlphaDEX Fund (FLN) seeks to track the NASDAQ AlphaDEX Latin America Index, which selects and weights Latin American stocks based on growth and value factors rather than market capitalization. This regional equity ETF provides exposure to companies across major Latin American markets including Brazil, Mexico, Chile, and other emerging economies.
How It Works
FLN uses First Trust's proprietary AlphaDEX methodology that ranks Latin American stocks on growth factors (sales growth, one-year sales growth) and value factors (book value-to-price, cash flow-to-price). The top-scoring stocks are selected and equally weighted within sector groups, then rebalanced quarterly. This active index approach typically holds 30-50 positions concentrated in the largest and most liquid Latin American companies, overweighting stocks showing the best combined growth and value characteristics.
Key Features
- Factor-based selection methodology targets Latin American stocks with superior growth and value metrics versus traditional cap-weighted approaches
- Equal weighting within sectors reduces concentration risk compared to cap-weighted Latin America ETFs dominated by Brazilian banks
- Quarterly rebalancing captures changing factor dynamics while maintaining exposure to region's economic growth themes
Risks
- This ETF can lose significant value during Latin American economic crises, currency devaluations, or political instability affecting regional markets
- Currency risk from unhedged exposure means strengthening U.S. dollar reduces returns even if local stock prices remain stable
- Emerging market volatility could cause 40-60% declines during global risk-off periods, with recovery dependent on commodity cycles
Who Should Own This
Best suited as a satellite holding (3-8% of equity allocation) for aggressive investors with 5+ year time horizons seeking emerging market diversification. High risk tolerance required due to Latin American political and economic volatility. Appropriate for investors wanting factor-based exposure to regional growth themes beyond traditional cap-weighted emerging market ETFs.