First Trust Launches First Trust Bloomberg Emerging Market Democracies ETF

Rhea-AI Summary

First Trust Advisors has launched the First Trust Bloomberg Emerging Market Democracies ETF (NYSE Arca: EMDM), targeting investment in emerging markets prioritizing political rights and civil liberties. The ETF aims to mirror the Bloomberg Emerging Market Democracies Index, highlighting countries recognized as Electoral Democracies by Freedom House. This fund is part of a strategy to address investor concerns over governance in traditional emerging markets, with anticipated long-term growth potential. First Trust currently manages approximately $201 billion in assets as of January 31, 2023.

Positive

• Launch of the First Trust Bloomberg Emerging Market Democracies ETF (EMDM) focused on countries with strong political rights.
• Potential for long-term growth in emerging markets despite existing investor concerns.
• The ETF aims to address specific values-based investing interests endorsed by Freedom House.

Negative

• None.

An ETF that focuses on companies in emerging market countries where political rights and civil liberties are highly regarded

WHEATON, Ill.--(BUSINESS WIRE)-- First Trust Advisors L.P. (“First Trust”), a leading exchange-traded fund (“ETF”) provider and asset manager, announced today that it has launched a new ETF, the First Trust Bloomberg Emerging Market Democracies ETF (NYSE Arca: EMDM) (the “fund”). The fund seeks investment results that correspond generally to the price and yield (before the fund’s fees and expenses) of an equity index called the Bloomberg Emerging Market Democracies Index (the “index”).

The majority of global economic growth is expected to occur outside of the U.S. in the next few years, particularly in emerging markets, according to data from the International Monetary Fund (“IMF”). Traditional emerging market benchmarks may have significant weight in countries whose governmental policies and living conditions may not reflect democratic views toward individual and collective freedoms.

“Concerns about the rule of law, political rights, and civil liberties have led many investors to avoid allocating to emerging markets,” said Ryan Issakainen, CFA, Senior Vice President and ETF Strategist at First Trust. EMDM aims to provide exposure to parts of the emerging markets segment where political rights and civil liberties are highly regarded. These countries must qualify as Electoral Democracies, a Freedom House designation that reflects the fact that a democratic electoral system requires not only fair balloting procedures and basic political competition, but also some respect for the rule of law and civil liberties, such as freedom of assembly. “By screening out countries that are not considered Electoral Democracies, we believe this ETF addresses many such concerns, while also providing exposure to the robust long-term growth potential of emerging markets stocks,” Issakainen said.

"Bringing new ideas to market is a principal focus area for Bloomberg Indices as we recognize the opportunity for unique benchmarks that address specific interests, such as values-based investing. We're excited to see First Trust take one of these ideas forward to investors and launch an ETF with the Bloomberg Emerging Market Democracies Index," said Dave Gedeon, Head of Index Product, Bloomberg Index Services Limited.

For more information about First Trust, please contact Ryan Issakainen at (630) 765-8689 or RIssakainen@FTAdvisors.com.

About First Trust

First Trust is a federally registered investment advisor and serves as the fund’s investment advisor. First Trust and its affiliate First Trust Portfolios L.P. (“FTP”), a FINRA registered broker-dealer, are privately held companies that provide a variety of investment services. First Trust has collective assets under management or supervision of approximately $201 billion as of January 31, 2023 through unit investment trusts, exchange-traded funds, closed-end funds, mutual funds and separate managed accounts. First Trust is the supervisor of the First Trust unit investment trusts, while FTP is the sponsor. FTP is also a distributor of mutual fund shares and exchange-traded fund creation units. First Trust and FTP are based in Wheaton, Illinois. For more information, visit http://www.ftportfolios.com.

You should consider the fund’s investment objectives, risks, and charges and expenses carefully before investing. Contact First Trust Portfolios L.P. at 1-800-621-1675 or visit www.ftportfolios.com to obtain a prospectus or summary prospectus which contains this and other information about the fund. The prospectus or summary prospectus should be read carefully before investing.

Risk Considerations

You could lose money by investing in a fund. An investment in a fund is not a deposit of a bank and is not insured or guaranteed. There can be no assurance that a fund’s objective(s) will be achieved. Investors buying or selling shares on the secondary market may incur customary brokerage commissions. Please refer to each fund’s prospectus and SAI for additional details on a fund’s risks. The order of the below risk factors does not indicate the significance of any particular risk factor.

Some Asian economies are highly dependent on trade with other countries and there is a high concentration of market capitalization and trading volume in a small number of Asian issuers as well as a high concentration of investors and financial intermediaries. Certain Asian countries experience expropriation and nationalization of assets, confiscatory taxation, currency manipulation, political instability, armed conflict and social instability as a result of religious, ethnic, socio-economic and/or political unrest. In particular escalated tensions involving North Korea could have severe adverse effect on Asian economies. Recent developments between the U.S. and China have heightened concerns of increased tariffs and restrictions on trade

Unlike mutual funds, shares of the fund may only be redeemed directly from a fund by authorized participants in very large creation/redemption units. If a fund’s authorized participants are unable to proceed with creation/redemption orders and no other authorized participant is able to step forward to create or redeem, fund shares may trade at a premium or discount to a fund’s net asset value and possibly face delisting and the bid/ask spread may widen.

A fund that effects all or a portion of its creations and redemptions for cash rather than in-kind may be less tax-efficient.

Changes in currency exchange rates and the relative value of non-US currencies may affect the value of a fund’s investments and the value of a fund’s shares.

A fund is susceptible to operational risks through breaches in cyber security. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss.

Depositary receipts may be less liquid than the underlying shares in their primary trading market and distributions may be subject to a fee. Holders may have limited voting rights, and investment restrictions in certain countries may adversely impact their value.

Investments in emerging market securities are generally considered speculative and involve additional risks relating to political, economic and regulatory conditions.

Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market.

Financial services companies are subject to the adverse effects of economic recession, currency exchange rates, government regulation, decreases in the availability of capital, volatile interest rates, portfolio concentration in geographic markets, industries or products, and competition from new entrants in their fields of business.

An index fund will be concentrated in an industry or a group of industries to the extent that the index is so concentrated. A fund with significant exposure to a single asset class, or the securities of issuers within the same country, state, region, industry, or sector may have its value more affected by an adverse economic, business or political development than a broadly diversified fund.

A fund may be a constituent of one or more indices or models which could greatly affect a fund’s trading activity, size and volatility.

There is no assurance that the index provider or its agents will compile or maintain the index accurately. Losses or costs associated with any index provider errors generally will be borne by a fund and its shareholders.

Information technology companies are subject to certain risks, including rapidly changing technologies, short product life cycles, fierce competition, aggressive pricing and reduced profit margins, loss of patent, copyright and trademark protections, cyclical market patterns, evolving industry standards and regulation and frequent new product introductions.

Since securities that trade on non-U.S. exchanges are closed when a fund’s primary listing is open, there are likely to be deviations between the current price of an underlying security and the last quoted price from the closed foreign market, resulting in premiums or discounts to a fund’s NAV.

Large capitalization companies may grow at a slower rate than the overall market.

The economies of Latin American countries have in the past experienced considerable difficulties, including high inflation rates, high interest rates, high unemployment, government overspending and political instability. International economic conditions, particularly those in the United States, Europe and Asia, as well as world prices for oil and other commodities may also influence the development of Latin American economies. Many Latin American countries are highly reliant on the exportation of commodities and their economies may be significantly impacted by fluctuations in commodity prices and the global demand for certain commodities.

Market risk is the risk that a particular security, or shares of a fund in general may fall in value. Securities are subject to market fluctuations caused by such factors as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious disease or other public health issues, recessions, or other events could have significant negative impact on a fund. In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain fund investments as well as fund performance. The COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has resumed “reasonably” normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease.

A fund faces numerous market trading risks, including the potential lack of an active market for fund shares due to a limited number of market makers. Decisions by market makers or authorized participants to reduce their role or step away in times of market stress could inhibit the effectiveness of the arbitrage process in maintaining the relationship between the underlying values of a fund’s portfolio securities and a fund’s market price.

Large inflows and outflows may impact a new fund’s market exposure for limited periods of time.

An index fund’s return may not match the return of the index for a number of reasons including operating expenses, costs of buying and selling securities to reflect changes in the index, and the fact that a fund’s portfolio holdings may not exactly replicate the index.

A fund classified as “non-diversified” may invest a relatively high percentage of its assets in a limited number of issuers. As a result, a fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly concentrated in certain issuers.

Securities of non-U.S. issuers are subject to additional risks, including currency fluctuations, political risks, withholding, lack of liquidity, lack of adequate financial information, and exchange control restrictions impacting non-U.S. issuers.

A fund and a fund’s advisor may seek to reduce various operational risks through controls and procedures, but it is not possible to completely protect against such risks. The fund also relies on third parties for a range of services, including custody, and any delay or failure related to those services may affect the fund’s ability to meet its objective.

A fund that invests in securities included in or representative of an index will hold those securities regardless of investment merit and the fund generally will not take defensive positions in declining markets.

Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred stocks are typically subordinated to other debt instruments in terms of priority to corporate income, and therefore will be subject to greater credit risk than those debt instruments.

The market price of a fund’s shares will generally fluctuate in accordance with changes in the fund’s net asset value (“NAV”) as well as the relative supply of and demand for shares on the exchange, and a fund’s investment advisor cannot predict whether shares will trade below, at or above their NAV.

Real Estate Investment Trusts (“REITs”) are subject to risks the risks of investing in real estate, including, but not limited to, changes in the real estate market, vacancy rates and competition, volatile interest rates and economic recession. Increases in interest rates typically lower the present value of a REIT’s future earnings stream and may make financing property purchases and improvements more costly. The value of a fund will generally decline when investors in REIT stocks anticipate or experience rising interest rates.

Taiwan is an emerging market and demonstrates significantly higher volatility from time to time. Taiwan’s ongoing tensions with China may materially affect the Taiwanese economy. Also, the Taiwanese economy is export-oriented and dependent upon an open-world trade regime.

Trading on an exchange may be halted due to market conditions or other reasons. There can be no assurance that a fund’s requirements to maintain the exchange listing will continue to be met or be unchanged.

The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.

First Trust Advisors L.P. is the adviser to the fund. First Trust Advisors L.P. is an affiliate of First Trust Portfolios L.P., the fund’s distributor.

“Bloomberg^®” and the indices licensed herein (the “Indices”) are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the Indices (collectively, “Bloomberg”) and have been licensed for use for certain purposes by First Trust Advisors L.P. (the “Licensee”). Bloomberg is not affiliated with the Licensee, and Bloomberg does not approve, endorse, review, or recommend the financial products referenced herein (the “Financial Products”). Bloomberg does not guarantee the timeliness, accurateness, or completeness of any data or information relating to the Indices or the Financial Products.

Freedom House is a non-profit, majority U.S. government funded organization in Washington, D.C., that conducts research and advocacy on democracy, political freedom, and human rights.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230303005251/en/

Ryan Issakainen

First Trust

(630) 765-8689

RIssakainen@FTAdvisors.com

Source: First Trust Advisors L.P.

FAQ

What is the First Trust Bloomberg Emerging Market Democracies ETF (EMDM)?

The EMDM ETF launched by First Trust Advisors focuses on investing in companies from countries recognized as Electoral Democracies, offering exposure to emerging markets with high regard for political rights and civil liberties.

What index does the EMDM ETF track?

The EMDM ETF seeks to replicate the performance of the Bloomberg Emerging Market Democracies Index.

When was the EMDM ETF launched?

The First Trust Bloomberg Emerging Market Democracies ETF (EMDM) was launched recently, as announced in the press release from First Trust Advisors.

What assets does First Trust manage?

As of January 31, 2023, First Trust manages approximately $201 billion in assets across various investment vehicles.

Who qualifies as an Electoral Democracy for the EMDM ETF?

Countries must meet the criteria set by Freedom House, which assesses political rights and civil liberties to qualify as Electoral Democracies.