First Trust Horizon Managed Volatility Developed International ETF (HDMV) seeks to provide exposure to developed international equity markets while actively managing portfolio volatility through dynamic hedging strategies. The fund targets reduced volatility compared to traditional international stock ETFs while maintaining participation in global equity market returns outside the United States.
How It Works
HDMV employs an actively managed approach that combines long positions in developed international equities with volatility management overlays including options strategies and currency hedging. The fund dynamically adjusts its hedging positions based on market conditions and volatility forecasts. Portfolio managers actively select international stocks from developed markets while implementing systematic risk management techniques to reduce overall portfolio volatility during market stress periods.
Key Features
- Active volatility management through options overlays and dynamic hedging strategies, unlike passive international ETFs
- Attractive 4.23% dividend yield from international dividend-paying stocks across developed markets globally
- Zero expense ratio structure makes it cost-competitive despite active management and sophisticated volatility control strategies
Risks
- This ETF can lose value if volatility management strategies fail during extreme market dislocations, potentially underperforming unhedged international funds
- Currency fluctuations between the U.S. dollar and foreign currencies can significantly impact returns despite hedging efforts
- International equity exposure means losses during global market downturns, with developed markets potentially declining 20-40% in bear markets
Who Should Own This
Best suited for conservative to moderate risk investors with 3-5 year time horizons seeking international diversification with reduced volatility. Appropriate as a satellite holding representing 10-20% of equity allocation for investors wanting global exposure but concerned about traditional international ETF volatility. Works well for income-focused portfolios given the 4.23% dividend yield.