First Trust Advisors has thrown down the gauntlet.

In a major challenge to PowerShares, First Trust Advisors has teamed up with Russell to launch a new family of exchange-traded funds (ETFs) that use quantitative strategies in an attempt to outperform the market. 

So far, First Trust has filed nine sector-based funds with the Securities and Exchange Commission (SEC), covering the following areas:

• Consumer Discretionary
• Consumer Staples
• Energy
• Financial
• Health Care
• Industrials
• Materials
• Technology
• Utilities

The filing is available here.

Those funds are just the start, however.  According to Dan Waldron, vice president of ETFs at First Trust, the company plans to expand its Russell-linked ETFs over the full slate of domestic style categories, international arenas and other areas.

The company already has eight other ETFs on the market, including at least one "alpha-seeking" fund that follows a somewhat similar approach to the new products, the DB Strategic Value Fund.   The partnership with Russell, however - one of the biggest names in the indexing industry - elevates the importance of the latest filings. Whereas previously, the company seemed to take a haphazard approach to the ETF market, throwing a handful of different funds at the market to see what would stick, the new plans to launch an organized family of funds with a major partner like Russell suggest a more coherent and bolder strategy of growing in the market.

The company thinks the opportunity is quite large.  According to Waldron, the new funds represent the "next wave" in the ETF market, with a pitch fine-tuned to the fast-growing financial advisor market.

"We are building this business around financial advisors, and financial advisors have been pitching active funds to their client forever," says Waldron.  "Advisors love ETFs, but in a sense, going to index funds is regressing for them. We think advisors want to deliver excess returns and generate superior performance for their clients.  We think the next generation of ETFs will be those that generate alpha."

First Trust isn't alone in position, of course.  From PowerShares to RAFI to WisdomTree, indexers and ETF providers alike have been moving towards pseudo-active management for some time. Whether that will ultimately pay off for investors is an open question, but Waldron is convinced that the market demand is there.

"Advisors want a better experience for their clients," says Waldron. "Beta is good, but alpha is better."

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