Making its debut on 03/10/2014, smart beta exchange traded fund First Trust RBA American Industrial Renaissance ETF (AIRR) provides investors broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $4.01 billion, making it one of the largest ETFs in the Industrials ETFs. Before fees and expenses, this particular fund seeks to match the performance of the Richard Bernstein Advisors American Industrial Renaissance Index.
The Richard Bernstein Advisors American Industrial Renaissance Index is measures the performance of small and mid cap US companies in the industrial and community banking sectors.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.70% for this ETF, which makes it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 0.29%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
AIRR's heaviest allocation is in the Industrials sector, which is about 90.3% of the portfolio.
When you look at individual holdings, Dycom Industries, Inc. (DY) accounts for about 3.42% of the fund's total assets, followed by Bwx Technologies, Inc. (BWXT) and Emcor Group, Inc. (EME).
AIRR's top 10 holdings account for about 29.7% of its total assets under management.
Performance and Risk
Year-to-date, the First Trust RBA American Industrial Renaissance ETF has added roughly 8.59% so far, and is up roughly 25.16% over the last 12 months (as of 07/03/2025). AIRR has traded between $61.92 and $86.09 in this past 52-week period.
AIRR has a beta of 1.27 and standard deviation of 25.10% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 57 holdings, it effectively diversifies company-specific risk .
Alternatives
First Trust RBA American Industrial Renaissance ETF is an excellent option for investors seeking to outperform the Industrials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Vanguard Industrials ETF (VIS) tracks MSCI US Investable Market Industrials 25/50 Index and the Industrial Select Sector SPDR ETF (XLI) tracks Industrial Select Sector Index. Vanguard Industrials ETF has $5.73 billion in assets, Industrial Select Sector SPDR ETF has $22.03 billion. VIS has an expense ratio of 0.09% and XLI changes 0.08%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Industrials 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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
First Trust RBA American Industrial Renaissance ETF (AIRR): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
