NEW YORK (TheStreet) -- Earlier this week First Trust launched the First Trust Dorsey Wright Focus 5 ETF (FV) which is a fund of funds that combines First Trust's suite of industry and AlphaDEX sector funds with a momentum strategy overlay built on relative strength managed by Dorsey Wright & Associates.
The term AlphaDEX in the name of the sector funds refers to the quantitative screening process that considers fundamentals such as book value, cash flow and price to sales. All nine AlphaDEX sector funds have outperformed their corresponding Select Sector SPDR ETFs for one and five year periods.
First Trust also offers a wide range of narrow industry and niche funds from all of the broad sectors.
Dorsey Wright manages several funds for PowerShares that apply the DWA relative strength model to individual stocks. Three of the longer tenured PowerShares funds include the PowerShares DWA Developed Markets Momentum Portfolio (PIZ), PowerShares DWA Emerging Markets Momentum Portfolio (PIE) and PowerShares DWA Momentum Portfolio (PDP) and all three have outperformed their corresponding market cap weighted benchmark fund for five years and two of the three have outperformed for one year.
The process for FV is very straightforward. DWA will screen First Trust's universe of sector and industry funds and rank them for relative strength and the top five will populate the fund. The screening will occur weekly and the fund will be reconstituted as required based on and changes in the rankings.