Highlighting the recent performance and themes within the First Trust Thematic Focus Five Model (FTTHEME5.TR).
Given the mixed performance for broader US equities so far in 2025, clients have reached out seeking alternatives to traditional indexed equity exposure or sector rotation strategies. Among the model options on the NDW Platform to provide alternative equity exposure is the First Trust Thematic Focus Five Model (Total Return) (FTTHEME5.TR), which utilizes a lineup of First Trust Thematic ETFs that seek to provide exposure to a variety of investment trends that are related to innovative, high-growth industries.
The First Trust Thematic Focus Five Model is designed to identify the five strongest ETFs and utilizes a universe of sixteen thematic ETFs that span various sectors and sub-sectors. Using Nasdaq Dorsey Wright’s relative strength matrix tool and total return pricing data, each one of the thematic ETFs is compared to the rest of the model universe and then ranked according to their relative strength. The model holds the top five ETFs and holdings are only sold when they fall sufficiently in ranking versus the other thematic ETFs within the relative strength matrix. When an ETF is removed from the model holdings, it is replaced with the highest-ranking fund not already owned in the model inventory. Once an addition or deletion has been made, the portfolio is rebalanced so each position within the Focus Five Thematic Model is equally weighted.
In the latter part of April (4/22), the Model rotated out of the First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (GRID) and First Trust Indxx Innovative Transaction & Process ETF (LEGR), which had been holdings since the model’s inception in September 2023. In their place, the First Trust NASDAQ Cybersecurity ETF (CIBR) and First Trust Down Jones International Internet ETF (FDNI) were purchased, shifting the industry exposure within broader technology and adding a flair of international equities to the model. The remaining three holdings have been within the model since inception in September 2023 and bring exposure to specific themes from the broader technology, industrials, consumer discretionary, and utilities sectors when examining the underlying holdings of the funds. Each of the individual ETFs within the current holdings maintain an acceptable fund score north of 3 with four of the five holdings maintaining fund scores north of 5.
So far in 2025, the First Trust Thematic Focus Five Model has outperformed its benchmark, the S&P 500 Total Return Index (TR.SPXX), each month of the year through May and is up more than 10% year-to-date on a total return basis, outperforming the benchmark by more than 9%. On a one-year roll, the model is outperforming the benchmark by more than 7% and brought the strategy back ahead the total return SPX when evaluating performance since inception. The current holdings have also outperformed their benchmark on a year-to-date basis with three – FDNI, CIBR, and BGNE – each being up 13% or more versus the total return benchmark.
Those who may utilize either the First Trust Focus Five (FTRUST5) or First Trust International Focus Five (FTRUSTINTL) - or similar tactical sector or country rotation strategies - could look to add the Thematic Focus Five Model to provide tactical exposure to innovative themes within the market along with those sectors in the US and regions of the globe exhibiting positive RS and controlled by demand. For more information on the model, check out the information file or view our models page.
