What is the EFRA ETF ?
Exchange-Traded Funds (ETFs) have gained immense popularity among investors due to their diversification benefits, ease of trading, and cost-efficiency. One such ETF that has caught the attention of the financial world is the EFRA ETF. In this article, we will delve into the details of the EFRA ETF, its underlying assets, benefits of investing in it, and considerations before making an investment.
EFRA ETF: Overview
The EFRA ETF seeks to track the investment results of the FTSE Green Revenues Select Infrastructure and Industrials Index, which is developed by FTSE International Limited. The Underlying Index is composed of U.S. and non-U.S. equity securities selected from the FTSE Global All Cap Index. It captures infrastructure and industrials solutions that support energy efficiency, emissions mitigation, pollution reduction, and resource optimization. The EFRA ETF focuses on companies that derive at least 40% of their combined annual green revenues from selected GRCS micro-sectors related to these themes.
EFRA ETF Underlying and Exposure: What Does it Track and How?
The EFRA ETF aims to invest in companies that contribute significantly to green revenues. It focuses on three key themes: energy efficiency and emissions mitigation, pollution reduction, and land and resource optimization. Companies involved in producing energy-efficient infrastructure solutions, clean transportation, emissions mitigation infrastructure, clean water solutions, sustainable waste management, air pollution solutions, and land-use optimization are considered for inclusion in the ETF. The Index Provider also applies exclusions, such as companies involved in controversial weapons, tobacco, thermal coal, or with controversies related to human rights, labor, environment, and anti-corruption.
EFRA overlap What is the EFRA ETF ?
EFRA ETF: Benefits of Investing
Investing in the EFRA ETF offers several advantages. Firstly, it provides exposure to companies driving sustainable practices and contributing to a greener future. By investing in these companies, investors align their portfolios with environmentally responsible initiatives. Additionally, the EFRA ETF offers diversification across various sectors and geographic regions, reducing individual stock risk. Furthermore, the ETF's representative sampling indexing strategy aims to achieve lower costs and better after-tax performance compared to actively managed investment companies.
EFRA ETF: Considerations Before Investing
While the EFRA ETF has its merits, investors should be aware of certain considerations before making an investment decision. As with any investment, there are risks involved, and past performance does not guarantee future results. The performance of the ETF is closely tied to the performance of its underlying index, which can be influenced by changes in the green revenues of constituent companies. Moreover, market conditions, geopolitical events, and regulatory changes can also impact the ETF's performance. It is essential for investors to thoroughly research and understand the ETF's prospectus, fees, and expenses before investing.
Conclusion:
The EFRA ETF presents an exciting opportunity for investors seeking exposure to companies promoting sustainable and environmentally conscious practices. It tracks the FTSE Green Revenues Select Infrastructure and Industrials Index and invests in companies with significant green revenues. While the ETF offers diversification and lower costs, investors should carefully consider potential risks and conduct thorough due diligence before making investment decisions.
Disclaimer: This article does not provide any investment advisory services. Investors are encouraged to consult with a qualified financial advisor or professional before making investment decisions.
Sources:
FTSE Green Revenues Select Infrastructure and Industrials Index Methodology
EFRA ETF Prospectus
Financial market data as of March 31, 2023
EFRA ETF issuer
EFRA ETF official page
EFRA quote and analysis
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FAQ
What is the EFRA ETF?
The EFRA ETF, also known as the name of the fund is not explicitly mentioned in the provided information. However, based on the description, it appears to be an actively managed exchange-traded fund that invests in a combination of growth-oriented equity ETFs and U.S. Treasuries or other cash equivalents. The fund aims to achieve long-term capital appreciation by using proprietary quantitative models and market research to allocate its assets.
What is the investment strategy of the EFRA ETF?
The EFRA ETF primarily invests in growth-oriented equity ETFs, including domestic and foreign (including emerging markets) growth-oriented equity securities of any market capitalization, which may include real estate investment trusts (REITs). Additionally, the fund allocates a portion of its portfolio to U.S. Treasuries or other cash equivalents. The advisor uses quantitative models and various technical, economic, and behavioral analysis indicators to determine the allocation between equity ETFs and fixed-income assets.
How does the EFRA ETF allocate its assets?
The EFRA ETF's asset allocation is driven by its advisor's proprietary quantitative models and market research. When the models indicate a bullish trend in the equity market, the fund is generally 100% invested in growth-oriented equity ETFs. On the other hand, when the models indicate a bearish trend, the fund is 50% invested in growth-oriented equity ETFs and 50% invested in U.S. Treasuries or other cash equivalents to hedge risk.
What types of ETFs are included in the EFRA ETF's portfolio?
The EFRA ETF includes growth-oriented equity ETFs that are selected based on their potential to generate higher than average returns over a long period while carrying a higher level of risk. The growth-oriented ETFs cover various asset classes, such as small-cap U.S. stocks, large-cap U.S. stocks, emerging market stocks, and developed international stocks. The ETFs in the portfolio must have competitive expense ratios and closely track the respective asset classes they represent.
What indicators does the advisor use to determine the market trend for asset allocation?
The advisor uses a blend of technical momentum, economic, and behavioral analysis indicators to determine the market trend. These indicators include moving average crossovers, oscillators, price acceleration measurements, labor market data, market breadth data, earnings data, and analyst sentiment data. When these indicators suggest a bullish trend, the fund invests in growth-oriented equity ETFs, and when they indicate a bearish trend, the fund allocates to U.S. Treasuries or other cash equivalents.