NEW YORK (TheStreet) -- This past spring First Trust restructured its Strategic Value Index Fund and renamed it the First Trust Capital Strength ETF (FTCS - Get Report).

The new fund falls into the "smart beta" category I have written about recently. Such funds use custom screens to select components from broad-based indices in an effort to outperform their benchmarks.

FTCS starts by identifying the 500 largest U.S. stocks that have at least $5 million in daily trading volume. The ETF screens those 500 stocks to find the ones with at least $1 billion in cash or short-term investments, a ratio of market cap to long-term debt of less than 30% and a return on equity greater than 15%. From there, it scores the stocks for volatility, and the fund purchases equal amounts of the 50 stocks that have the lowest volatility.

FTCS also has rules to avoid being overly concentrated in any single sector, capping exposure at 30%. The index is reconstituted quarterly.

The current sector makeup favors industrials, at 20%, followed by consumer services at 19%, health care at 17%, consumer goods at 17% and tech at 10%. The fund has no exposure to utilities or telecom. Omitting those two sectors is logical because they tend to be very debt-heavy.

FTCS is oriented toward large-cap stocks, so most of the names in the fund should be familiar to you, such as MasterCard ( MA - Get Report), Qualcomm ( QCOM - Get Report) and Nike ( NKE - Get Report).

Interestingly, defense contractors make up 8% of the fund, which could smooth out the ride for FTCS if the situation in Syria escalates into a situation that is bad for the markets in general but good for defense stocks.

First Trust has said that it converted its more traditional large-cap value fund into the Capital Strength fund after realizing that many investors are concerned about how fast the market has gone up in recent years and worried that the fundamentals do not necessarily support the big rally.

First Trust says that companies with the attributes identified by FTCS will better weather a large downturn or a period of increased volatility because those companies have more options with their cash and less financial risk because of their low debt.

Although First Trust hasn't said as much, it's also possible that it made the conversion after deciding that the original fund's lack of assets -- $37 million -- indicated the market didn't need another basic large-cap value fund.

Although the capital strength process yields a value tilt, it is not a carbon copy of other large-cap value funds offered by competitors.

The iShares S&P 500 Value ETF ( IVE - Get Report), the Power Shares Dynamic Large Cap Value Portfolio ( PWV - Get Report) and the Vanguard Mega Cap Value ETF ( MGV - Get Report) all have weightings greater than 20% in the financial sector compared to just 8% for FTCS. The other funds have much less exposure to the industrial sector than FTCS.

Since FTCS started trading in its current incarnation these differences have not mattered because all four of these funds have traded in lockstep. Historically the industrial sector tends to decline more than the broad market during the bear phase of the cycle and then bounces back more than the broad market in new bull markets.

Although First Trust seeks to offer a fund that is more resilient to bear market declines, the fund may not in fact do that if it still has its heaviest weighting in the industrial sector when the next large decline comes.

At the time of publication, Nusbaum had no positions in securities mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.