Waldron says that First Trust wants to capitalize on active management strategies to generate even better returns. The company is working with index providers that create strategy-based indices.
The company has eight ETFs on the market and expects to have 15 or more ETFs by the end of the year. "Anything going forward will be a next-generation ETF," Waldron says. Other ETFs that use fundamentals to pick stocks include the family of funds from WisdomTree Investments that weight indices based on total cash dividends companies pay or their dividend yield. WisdomTree launched its first set of ETFs in June; last week the company filed to launch 10 more funds based on international sectors. ETF giant PowerShares has a set of ETFs that are based on "intelligent indexes" that use 10 factors to determine whether a company fits into an index at any one time: projected and actual earnings, sales growth, cash-flow growth, book growth, P/E ratio, price-to-sales, price-to-cash flow, price-to-book and dividend yield. Stocks are then chosen based on fundamentals, valuations, timeliness and risk.


