First Trust Rolls Out Smart Phone ETF
February 17, 2011
First Trust, the exchange-traded fund company known for its successful natural gas drillers fund, today rolled out its so-called smart phone ETF that’s focused on technology companies specializing in devices like iPhones or BlackBerrys.
The First Trust Nasdaq CEA Smartphone Index Fund (Nasdaq: FONE) tracks the Nasdaq OMX CEA Smartphone Index, a benchmark focused on information technology and telecommunications. FONE will come with a 0.70 percent annual expense ratio, according to a regulatory filing the Wheaton, Ill.-based company made on Feb. 15.
The benchmark includes companies involved in everything from hardware manufacturing to operating systems, to software and service names associated with the development, sales and use of smart phones.
The popularity of wireless devices is unquestionable, as advertising campaigns that fill the airwaves announcing new and improved phones clearly demonstrate. But it isn’t as clear that FONE will find a solid footing among tech-savvy investors who already have two ETFs with which to express their views
The SPDR S&P International Technology Sector ETF (NYSEArca: IPK) and the SPDR S&P International Telecommunications Sector ETF (NYSEArca: IST) had assets of $27.7 million and $11.7 million, respectively, as of Feb. 16, according to data compiled by IndexUniverse.com. They are also less expensive than FONE—both with expense ratios of 0.50 percent.
First Trust isn’t new to novelty ETFs. The company’s lineup of about 44 funds includes eight specialty ETFs that zoom in on niches ranging from IPOs to water. Most of these narrowly focused ETFs have well under $100 million in assets.
Still, the company has grown to manage more than $6 billion of assets in all its ETFs since it launched its first fund in 2005. Its most successful fund, the First Trust ISE-Revere Natural Gas Index Fund (NYSEArca: FCG), has gathered about $436 million in assets since its 2007 inception.
FONE’s benchmark is a modified equal-dollar-weighted index comprising some 80 securities, according to its recent filing with the Securities and Exchange Commission.
About 45 percent of the portfolio is allocated to “handset” companies that manufacture the equipment; 45 percent to “software applications/hardware components,” and the final 10 percent to wireless network “providers,” the filing said.
Its holdings must be publicly listed names classified as smart phone companies, have a minimum float-adjusted global market capitalization of $250 million, and a minimum three-month average daily trading volume of $1 million.