Making its debut on 08/27/2007, smart beta exchange traded fund First Trust STOXX European Select Dividend ETF (FDD) provides investors broad exposure to the European Equity ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. FDD has been able to amass assets over $800.44 million, making it one of the average sized ETFs in the European Equity ETFs. FDD, before fees and expenses, seeks to match the performance of the STOXX Europe Select Dividend 30 Index.
The STOXX Europe Select Dividend 30 Index consists of 30 high dividend-yielding securities selected from the STOXX Europe 600 Index.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for this ETF are 0.59%, making it one of the more expensive products in the space.
The fund has a 12-month trailing dividend yield of 3.74%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Abn Amro Group N.v. (ABN.NA) accounts for about 5.08% of the fund's total assets, followed by Aker Bp Asa (AKRBP.NO) and Legal & General Group Plc (LGEN.LN).
Its top 10 holdings account for approximately 42.41% of FDD's total assets under management.
Performance and Risk
The ETF has added about 6.63% and is up roughly 59.33% so far this year and in the past one year (as of 02/11/2026), respectively. FDD has traded between $12.08 and $18.77 during this last 52-week period.
The ETF has a beta of 0.69 and standard deviation of 15.95% for the trailing three-year period, making it a medium risk choice in the space. With about 33 holdings, it has more concentrated exposure than peers .
Alternatives
First Trust STOXX European Select Dividend ETF is not a suitable option for investors seeking to outperform the European Equity ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
iShares MSCI Eurozone ETF (EZU) tracks MSCI EMU Index and the Vanguard FTSE Europe ETF (VGK) tracks FTSE Developed Europe All Cap Index. iShares MSCI Eurozone ETF has $9.95 billion in assets, Vanguard FTSE Europe ETF has $31.8 billion. EZU has an expense ratio of 0.51% and VGK changes 0.06%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the European Equity ETFs
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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First Trust STOXX European Select Dividend ETF (FDD): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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