The First Trust Alternative Absolute Return Strategy ETF (NASDAQ: FAAR) is an exchange-traded fund that seeks to provide long-term total return by investing in alternative asset categories and strategies. Now as we begin the second month of 2023, it's interesting to take a look at the recent performance of the ETF and make predictions into its future performance.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, such as price-to-earnings ratios and dividend yields. And First Trust, whose managed futures fund delivered positive returns during last year's bear market, is launching the Multi-Strategy Alternative ETF.
The fund seeks to provide long-term total return. The fund will primarily gain exposure to alternative asset categories and strategies. These strategies may include, but are not limited to, global macro, managed futures, long/short equity, event driven, merger arbitrage, equity market neutral, and commodities. The fund also seeks to use derivatives, such as futures, options, and swaps, to gain exposure to underlying asset classes.
Now let's move to the performance of the ETF. Over the past three months, the ETF has delivered a return of 10.6%. This is slightly above the average of 9.7% for similar ETFs in the same category. In addition, the ETF has outperformed the S&P 500 by a significant margin. It has also outperformed the Dow Jones Industrial Average, which has returned 8.6% over the same period.
The disastrous performance of ARK Innovation ETF as the recent market volatility has caused some investors to question the viability of non-cap weighted indexes, with an 87% return mainly due to a single stock, Grayscale Bitcoin Trust. However, First Trust Alternative Absolute Return Strategy ETF has managed to stay the course and deliver a solid return over the past three months.
Now let's move to Slide 5, where I'll provide an overview of the performance of our Exchange segment. Fourth quarter net revenues totaled $2.2 billion, up 10% year-over-year. The segment's operating income was $1.2 billion, up 22% year-over-year.
In terms of sector exposure, First Trust Alternative Absolute Return Strategy ETF has exposure to the Energy - Natural Gas, Technology, Financials, and Healthcare sectors. The top holdings of the ETF include Microsoft Corporation, Apple Inc., Amazon.com Inc., Alphabet Inc., and Facebook Inc.
The fund has also delivered positive returns over the past year, with a return of 15.7%. This is significantly higher than the S&P 500, which has returned 8.5%. The ETF has also outperformed the Dow Jones Industrial Average, which has returned 11.0% over the same period.
Looking ahead, the outlook for First Trust Alternative Absolute Return Strategy ETF looks positive. Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics. If you're interested in broad exposure to the Energy - Natural Gas segment of the equity market, look no further than the First Trust Alternative Absolute Return Strategy ETF.
