First Trust Advisors has launched a new ETF that invests in companies from emerging markets that place a premium on human dignity. The First Trust Emerging Markets Human Flourishing ETF (FTHF ) trades on the New York Stock Exchange.
FTHF seeks to replicate the price and yield, before fees and expenses, of the Emerging Markets Human Flourishing Index. The fund targets companies from emerging markets that have a high “Human Dignity Score,” according to nonprofit organization Freedom House. Freedom House conducts research and advocacy on democracy, political freedom, and human rights.
See more: With FCFY, First Trust Targets Companies With High Free Cash Flow Yield
Securities must be a member of the Bloomberg Emerging Markets Large- and Mid-Cap universe. Each security must meet the index’s market cap and liquidity standards. In addition, they must be from a company domiciled in a country with a sufficient Human Dignity Score.
Scoring Securities Based on Freedom and Dignity
The Human Dignity Score generates from evaluating emerging market countries on data points sourced by Freedom House. The score is based on freedom of expression and belief (80%) and freedom from religious persecution (20%).
Freedom of expression and belief refers to the extent in which a particular country has free and independent media, allows for individuals to practice and express their religious faith, has academic freedom, and allows individuals to express their personal views on political or other sensitive topics. Freedom from religious persecution refers to the degree to which laws, policies, and practices of a particular country guarantee equal treatment of various segments of the population.
Only those companies domiciled in countries that score in the top 50th percentile of the Human Dignity Score rankings receive inclusion in the index. These companies are screened to exclude companies associated with seven defined controversial practices.
The top 150 securities ranked by free-float market cap. Of the top 150 securities, the 100 securities with the highest “Quality Score” are then selected. This score derives from a factor-based analysis of a security’s variability, profitability, and leverage.
Selected securities weight are based on a combination of a modified free-float market cap, a country exposure cap, and a sector exposure cap. The index reconstitutes annually and rebalances semiannually.
FTHF has an expense ratio of 0.75%.
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