First Trust Emerging Markets AlphaDEX Fund | research notes

First Trust Emerging Markets AlphaDEX Fund: An Overview

Introduction

First Trust Emerging Markets AlphaDEX Fund (NYSE: FEMS) is a closed-end fund that invests in emerging market equities. The fund is designed to provide investors with exposure to potential growth opportunities in developing markets around the world.

Investment Strategy

FEMS employs an AlphaDEX investment strategy, which involves using quantitative models to identify stocks that are expected to outperform their respective markets. The fund's portfolio is constructed based on factors such as:

• Price momentum
• Value
• Quality
• Earnings growth

By combining these factors, the fund aims to capture the potential upside in emerging market equities while minimizing downside risk.

Asset Allocation

As of September 30, 2022, FEMS had the following asset allocation:

• China: 29.6%
• India: 14.6%
• Taiwan: 9.2%
• South Korea: 7.7%
• Brazil: 7.1%
• Other Emerging Markets: 31.8%

Fees and Expenses

FEMS has the following fees and expenses:

• Annual management fee: 0.75%
• Annual distribution fee: 0.25%
• Other expenses: Approximately 0.15%

Historical Performance

Since its inception in May 2007, FEMS has produced a cumulative return of approximately 115%. The fund has outperformed its benchmark, the MSCI Emerging Markets Index, over various time periods.

Advantages and Disadvantages

Advantages:

• Potential for high growth in developing markets
• Diversification benefits through exposure to multiple emerging markets
• AlphaDEX strategy aims to enhance returns

Disadvantages:

• Can be subject to volatility due to political and economic factors in emerging markets
• Relatively high management fees
• Limited liquidity compared to open-end funds

Suitability

FEMS is suitable for investors with a long-term investment horizon and a tolerance for risk. The fund may be appropriate for investors seeking exposure to emerging market equities as part of a diversified portfolio.

Conclusion

First Trust Emerging Markets AlphaDEX Fund offers investors a potential opportunity to participate in the growth of developing markets. By utilizing an AlphaDEX investment strategy, the fund aims to capture potential upside while minimizing risk. However, investors should carefully consider the fund's fees, liquidity, and potential volatility before investing.

Business Model of First Trust Emerging Markets AlphaDEX Fund

First Trust Emerging Markets AlphaDEX Fund is an actively managed mutual fund that seeks to provide investors with long-term capital growth by investing in emerging market companies. The fund utilizes an enhanced indexing strategy that combines fundamental and quantitative factors to select and weight investments.

Investment Strategy

The fund employs the AlphaDEX investment process, which uses a proprietary model to identify companies with attractive growth potential and value characteristics. The model considers factors such as:

• Revenue growth
• Earnings per share (EPS) growth
• Return on equity (ROE)
• Price-to-earnings (P/E) ratio
• Price-to-book (P/B) ratio

The fund's portfolio is constructed by weighting holdings based on their AlphaDEX score, which measures the extent to which they meet the target investment criteria.

Advantages over Competitors

Enhanced Indexing: The AlphaDEX strategy combines the benefits of passive indexing with the active management of a portfolio manager, resulting in a more targeted investment approach. This enables the fund to capture growth opportunities while mitigating downside risk.

Diversification: The fund invests across a broad range of emerging market countries and sectors, providing diversification and reducing exposure to any single country or industry.

Tax Efficiency: The fund is structured as a mutual fund, which offers tax advantages compared to traditional actively managed funds. It distributes capital gains and dividends on a qualified basis, allowing investors to defer or avoid paying taxes on investment gains.

Experienced Management: The fund is managed by a team of experienced investment professionals with a deep understanding of emerging markets. This expertise allows them to navigate market complexities and make informed investment decisions.

Lower Fees: Compared to traditional actively managed funds, the First Trust Emerging Markets AlphaDEX Fund typically has lower fees, which can enhance returns for investors.

Conclusion

The First Trust Emerging Markets AlphaDEX Fund offers a unique investment strategy that combines the benefits of active management and enhanced indexing. Its advantages over competitors include its diversified portfolio, tax efficiency, experienced management, and lower fees, making it a compelling option for investors seeking long-term growth in emerging markets.

First Trust Emerging Markets AlphaDEX Fund (FEM)

Overview

First Trust Emerging Markets AlphaDEX Fund (FEM) is an actively managed exchange-traded fund (ETF) that tracks an index of emerging market equities. The fund's objective is to provide investors with long-term capital appreciation through exposure to a diversified portfolio of emerging market companies.

Investment Strategy

FEM employs the AlphaDEX methodology, which uses quantitative factors to select a portfolio of stocks. The fund's index is constructed by screening the investable universe of emerging market equities based on factors such as:

• Growth potential
• Value characteristics
• Price momentum
• Quality
• Risk

The index is rebalanced quarterly to maintain the desired factor exposure.

Fund Characteristics

• Ticker: FEM
• Expense Ratio: 0.60%
• Dividend Yield: 1.62%
• Launch Date: February 2009
• Assets Under Management: $2.2 billion

Portfolio Composition

As of December 31, 2022, FEM's portfolio was allocated as follows:

• Region:
  • China: 31.4%
  • India: 24.9%
  • Brazil: 16.2%
  • South Korea: 7.8%
  • Taiwan: 5.2%
• Sector:
  • Technology: 24.5%
  • Financials: 23.3%
  • Industrials: 19.5%
  • Consumer Discretionary: 13.4%
  • Materials: 9.7%

Top 10 Holdings

• Tencent Holdings: 6.9%
• Taiwan Semiconductor Manufacturing Company: 6.8%
• HDFC Bank: 6.5%
• Naspers: 6.3%
• Samsung Electronics: 5.9%
• Infosys: 5.3%
• Reliance Industries: 5.1%
• Itaú Unibanco Holding: 5.0%
• Petrobras: 4.9%
• Vale: 4.7%

Performance

Since its inception in February 2009, FEM has outperformed the MSCI Emerging Markets Index, its benchmark index, on an annualized basis.

Outlook

The outlook for emerging market equities is mixed. While the global economic outlook has improved, there are still some headwinds to growth, such as the war in Ukraine and rising interest rates. However, emerging market companies have historically outperformed developed market companies over the long term, and FEM is well-positioned to benefit from this trend.

Suitability

FEM is suitable for investors who seek exposure to emerging market equities and are comfortable with the associated risks. The fund is a good choice for long-term investors who are looking for a diversified and actively managed portfolio.

Similar Companies to First Trust Emerging Markets AlphaDEX Fund

1. iShares Core MSCI Emerging Markets ETF (EEM)

• Homepage: https://www.ishares.com/us/products/239715/ishares-core-msci-emerging-markets-etf
• Reason why customers may like it: Low expense ratio, broad market exposure, high liquidity.

2. Vanguard FTSE Emerging Markets ETF (VWO)

• Homepage: https://investor.vanguard.com/etf/profile/overview/vwo
• Reason why customers may like it: Extremely low expense ratio, efficient portfolio, high dividend yield.

3. SPDR Portfolio Emerging Markets ETF (SPEM)

• Homepage: https://www.spdrfunds.com/en/etf/overview/spem
• Reason why customers may like it: Enhanced yield through a covered call strategy, high liquidity, low tracking error.

4. WisdomTree Emerging Markets High Dividend Fund (DEM)

• Homepage: https://www.wisdomtree.com/products/overview/etf/dem
• Reason why customers may like it: Focuses on dividend-paying emerging market companies, high dividend yield, potential for income generation.

5. Invesco Emerging Markets Fund (EMGF)

• Homepage: https://www.invesco.com/us/financial-products/etfs/product-detail?audienceType=Investor&productId=4108
• Reason why customers may like it: Active management provides diversification away from the benchmark, potential for outperformance.

History of First Trust Emerging Markets AlphaDEX Fund (EMGF)

1998:

• The fund was launched as the "First Trust Emerging Markets Fund" by First Trust Advisors L.P.

2006:

• The fund adopted the AlphaDEX indexing methodology, which uses a quantitative model to select companies based on a combination of factors including earnings, cash flow, and price momentum.

2007:

• The fund's name was changed to "First Trust Emerging Markets AlphaDEX Fund".

2008:

• The fund experienced significant losses during the global financial crisis.

2010-2019:

• The fund gradually recovered and outperformed its benchmark, the MSCI Emerging Markets Index.

2020:

• The fund faced headwinds due to the COVID-19 pandemic, which impacted emerging markets.

2021-Present:

• The fund has rebounded and continued to deliver strong performance, benefiting from a recovery in emerging markets and the fund's active investment approach.

Key Features:

• Ticker Symbol: EMGF
• Investment Objective: To provide long-term capital appreciation by investing in a portfolio of mid-cap and small-cap companies in emerging markets.
• Index Tracked: AlphaDEX Emerging Markets Index
• Expense Ratio: 0.70%
• Minimum Investment: $5,000

Fund Performance:

• 3-Year Annualized Return: 10.32%
• 5-Year Annualized Return: 12.45%
• 10-Year Annualized Return: 10.59%
• Since Inception (1998): 10.10% annualized return

Investment Approach:

• AlphaDEX Indexing: The fund uses a quantitative model to identify companies with strong fundamentals and growth potential within emerging markets.
• Mid-Cap and Small-Cap Focus: The fund invests primarily in mid-cap and small-cap companies, which offer higher growth potential.
• Dividend Reinvestment: The fund reinvests dividends to maximize compounding returns.

2022

• October 2022: First Trust Emerging Markets AlphaDEX Fund announces a 5% dividend.

2021

• June 2021: The fund declares a dividend of 4.58%.
• March 2021: The fund launches a new share class, the ETF (EMAG).

2020

• October 2020: The fund celebrates its 20th anniversary.
• March 2020: The fund declares a dividend of 4.9%.

Recent Timelines

• January 2023: The fund announces a net asset value (NAV) of $20.05 per share.
• February 2023: The fund pays a dividend of 4.58% to shareholders of record.
• March 2023: The fund declares a dividend of 4.58%.

Exceptional Performance and Value in Emerging Markets

As an investor seeking growth potential in emerging economies, I highly recommend the First Trust Emerging Markets AlphaDEX Fund. This fund has consistently exceeded my expectations, delivering remarkable returns while maintaining a high level of diversification.

Exceptional Returns

Since its inception, the fund has consistently outperformed its benchmark, the MSCI Emerging Markets Index. Over the past five years, it has delivered an annualized return of over 10%, significantly exceeding the benchmark's return of around 5%. This performance is a testament to the fund's superior stock selection and active management approach.

Diversified Portfolio

The fund invests in a broad range of emerging market companies across various sectors and countries. This diversification helps to mitigate risk and enhance the overall performance of the portfolio. By investing in companies with strong fundamentals and growth potential, the fund provides investors with exposure to the promising future of emerging markets.

AlphaDEX Strategy

The First Trust Emerging Markets AlphaDEX Fund utilizes a proprietary AlphaDEX strategy that identifies undervalued stocks based on factors such as earnings growth, price momentum, and analyst recommendations. This strategy allows the fund to overweight high-growth potential companies and underweight those with lower growth prospects.

Active Management

The fund is actively managed by a team of experienced investment professionals who are deeply knowledgeable about emerging markets. This active management approach enables the fund to adjust its portfolio as market conditions change, ensuring that it remains well-positioned to capitalize on growth opportunities.

Low Fees

Compared to other emerging market funds, the First Trust Emerging Markets AlphaDEX Fund has relatively low fees. This cost efficiency allows investors to maximize their returns without incurring excessive expenses.

In Summary

For investors seeking a high-performing, well-diversified investment in emerging markets, the First Trust Emerging Markets AlphaDEX Fund is an exceptional choice. Its consistent outperformance, active management approach, and low fees make it an invaluable addition to any investment portfolio. I highly recommend this fund to anyone looking to capitalize on the growth potential of emerging markets.

Unlock Global Growth Potential with First Trust Emerging Markets AlphaDEX Fund

Are you looking for a powerful investment vehicle to harness the growth potential of emerging markets? Look no further than the First Trust Emerging Markets AlphaDEX Fund (FEM), a trailblazing fund designed to provide investors with diversified access to this dynamic asset class.

Dominate Emerging Markets with Smart Indexing

FEM employs a unique AlphaDEX® indexing methodology, which actively selects stocks from the emerging markets universe based on factors such as price momentum, earnings growth, and financial strength. This dynamic approach identifies high-performing companies with the potential to drive superior returns.

Diversify Globally for Enhanced Resilience

FEM offers investors instant exposure to a broad spectrum of emerging market economies, including China, India, Brazil, and South Korea. This diversification reduces country-specific risks and enhances the stability of your portfolio.

Managed by Industry Leaders

First Trust is a leading provider of innovative exchange-traded funds (ETFs) with a proven track record of success. The FEM fund is actively managed by a team of experienced investment professionals who stay abreast of market trends and economic developments.

Benefits of Investing in FEM

• Diversified exposure to emerging markets
• Active stock selection for enhanced performance
• Reduced country-specific risks
• Convenient ETF structure
• Low expense ratio

Elevate Your Portfolio with FEM

If you're an investor seeking long-term growth and diversification, the First Trust Emerging Markets AlphaDEX Fund (FEM) is an exceptional choice. With its smart indexing methodology, global reach, and professional management, FEM can help you unlock the full potential of emerging markets.

Visit the First Trust website today at [Insert Website URL Here] to learn more about FEM and explore how it can power your investment journey. Don't miss out on the opportunity to capitalize on the immense growth potential of emerging markets!

Main Supplier (Upstream Service Provider): ICE Data Services

Website: https://www.icedata.com/

Detailed Description:

ICE Data Services is a leading provider of real-time and historical market data, analytics, and related services to the global financial community. It is a subsidiary of Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange.

Specifically, ICE Data Services provides the following services to First Trust Emerging Markets AlphaDEX Fund:

• Market Data: ICE Data Services supplies First Trust with real-time and historical market data on emerging market securities worldwide. This data includes prices, quotes, volumes, and other market indicators.
• Index Calculation: ICE Data Services calculates and maintains the Emerging Markets AlphaDEX Index, which serves as the benchmark for First Trust Emerging Markets AlphaDEX Fund. The index is composed of approximately 1,000 emerging market stocks representing various sectors and countries.
• Risk Management Data: ICE Data Services provides First Trust with risk management data, such as volatility, correlations, and stress testing, to help the fund manage its investment portfolio.
• Analytics and Research: ICE Data Services offers analytics and research tools that enable First Trust to analyze market trends, identify investment opportunities, and make informed investment decisions.
• Data Analytics Platform: ICE Data Services provides First Trust access to its data analytics platform, which allows the fund to customize its data feeds, conduct advanced analysis, and create custom reports.

ICE Data Services is a trusted and reliable provider of market data and related services used by institutional investors, asset managers, and traders worldwide. Its partnership with First Trust Emerging Markets AlphaDEX Fund ensures that the fund has access to comprehensive, timely, and accurate market information to support its investment decisions.

Main Customer (or Downstream Company) of First Trust Emerging Markets AlphaDEX Fund

First Trust Emerging Markets AlphaDEX Fund (FEM) is an actively managed exchange-traded fund (ETF) that seeks to provide investment results that correspond generally to the price and yield performance of the AlphaDEX Emerging Markets Index (the "Index"). The Index is a rules-based index designed to measure the performance of emerging markets companies.

The main customers of FEM are individual and institutional investors who are looking for an investment vehicle that provides exposure to emerging markets equities. These investors may include:

• Individual investors: Individuals who are looking for a way to diversify their portfolios and gain exposure to emerging markets.
• Financial advisors: Financial advisors who recommend FEM to their clients as a way to meet their investment goals.
• Institutional investors: Institutions such as pension funds, endowments, and foundations that are looking for a way to allocate a portion of their assets to emerging markets.

Website of First Trust Emerging Markets AlphaDEX Fund

The website of First Trust Emerging Markets AlphaDEX Fund is: https://www.firsttrust.com/funds/etfs_fem.html

The website provides information about the fund, including its investment objectives, strategy, performance, and holdings. Investors can also find information about the fund's management team and fees.

Key Revenue Stream of First Trust Emerging Markets AlphaDEX Fund

The primary revenue stream for the First Trust Emerging Markets AlphaDEX Fund (NYSE: FDEM) is through management fees. The management fee is a percentage of the fund's net assets, which are calculated daily. The management fee is charged annually and is deducted from the fund's assets.

Estimated Annual Revenue

The estimated annual revenue for the First Trust Emerging Markets AlphaDEX Fund is approximately $20 million. This estimate is based on the following assumptions:

• The fund's net assets are $1 billion.
• The management fee is 0.95%.
• The fund's expenses are 0.50%.

Other Revenue Streams

In addition to management fees, the First Trust Emerging Markets AlphaDEX Fund may also generate revenue from the following sources:

• Interest income: The fund may earn interest on cash and other short-term investments.
• Dividend income: The fund may receive dividends from the stocks it holds.
• Capital gains: The fund may realize capital gains when it sells stocks at a profit.

Conclusion

The First Trust Emerging Markets AlphaDEX Fund's primary revenue stream is through management fees. The fund's estimated annual revenue is approximately $20 million.

Additional Notes:

• The management fee is subject to change.
• The fund's expenses may also change.
• The fund's net assets may fluctuate over time.
• The fund's performance may vary.

Disclaimer:

The information contained in this response is for informational purposes only and should not be construed as investment advice. Please consult with a financial advisor before making any investment decisions.

First Trust Exchange-Traded Funds (ETFs)

• Nuveen https://www.nuveen.com/

Fund Management

• First Trust Advisors L.P. https://www.firsttrust.com/

Index Provider

• AlphaDEX https://alphadex.com/

Custodian

• State Street Bank and Trust Company https://www.statestreet.com/

Transfer Agent

• American Stock Transfer & Trust Company, LLC https://www.astfinancial.com/

Auditor

• PricewaterhouseCoopers LLP https://www.pwc.com/

Other Key Service Providers

• Bloomberg (Data Provider) https://www.bloomberg.com/

• FactSet (Data Provider) https://www.factset.com/

• MSCI (Data Provider) https://www.msci.com/

Note: The key partners and service providers listed above are subject to change. It is recommended to refer to the fund's prospectus or website for the most up-to-date information.

Key Cost Structure of First Trust Emerging Markets AlphaDEX Fund

Ticker: FEMS

Investment Objective: To seek investment results that correspond generally to the price and yield (before the fund's fees and expenses) of an index called the Indxx Emerging Markets AlphaDEX℠ Index.

Expense Ratio: 0.55%

Estimated Annual Cost

The estimated annual cost of investing in FEMS for a hypothetical investment of $10,000 for different holding periods is as follows:

| Holding Period | Estimated Annual Cost | |---|---| | 1 Year | $55 | | 5 Years | $275 | | 10 Years | $550 | | 15 Years | $825 |

Detailed Breakdown of Fees and Expenses

Management Fee: 0.50% of average daily net assets

Other Expenses:

• Administrative expenses: 0.03% of average daily net assets
• Custodian/Transfer agency fees: 0.01% of average daily net assets
• Other operating expenses: 0.01% of average daily net assets

Total Annual Fund Operating Expenses: 0.55% of average daily net assets

Additional Information

• The expense ratio is calculated based on the fund's expenses for the most recent fiscal year ended September 30, 2022.
• The estimated annual cost is based on the expense ratio and an assumed investment of $10,000. The actual cost may vary depending on the actual expenses of the fund and the length of time the investment is held.
• The fund may also incur additional costs, such as brokerage fees and transaction costs, that are not included in the expense ratio.
• It is important to carefully consider the fees and expenses of any investment before investing.

Sales Channels and Estimated Annual Sales of First Trust Emerging Markets AlphaDEX Fund

Sales Channels

• Financial Advisors: The primary sales channel for the First Trust Emerging Markets AlphaDEX Fund is through financial advisors. Financial advisors recommend the fund to their clients based on the client's investment goals and risk tolerance.
• Broker-Dealers: Broker-dealers also sell the fund to their clients. Broker-dealers are typically large financial institutions that offer a wide range of investment products and services.
• Direct Sales: The fund can also be purchased directly from First Trust, the fund's investment advisor.

Estimated Annual Sales

The estimated annual sales of the First Trust Emerging Markets AlphaDEX Fund are not publicly available. However, the fund has approximately $1.2 billion in assets under management, which suggests that it has a significant amount of sales.

Additional Information

The First Trust Emerging Markets AlphaDEX Fund is a mutual fund that invests in emerging market stocks. The fund's objective is to provide investors with long-term capital appreciation. The fund uses an AlphaDEX investment strategy, which seeks to identify stocks that are undervalued relative to their peers.

The fund has a minimum investment of $1,000. The fund's expense ratio is 0.65%.

First Trust Emerging Markets AlphaDEX Fund

The First Trust Emerging Markets AlphaDEX Fund is an actively managed exchange-traded fund (ETF) that invests in emerging market stocks. The fund uses a proprietary index, the AlphaDEX Emerging Markets Index, to select stocks that it believes are undervalued and have the potential to outperform the broader emerging market index.

Customer Segments

The First Trust Emerging Markets AlphaDEX Fund is a suitable investment for a variety of customer segments, including:

• Individual investors: The fund can be a good way for individual investors to gain exposure to emerging market stocks. The fund's actively managed approach can help to reduce risk and improve returns.
• Institutional investors: The fund can be a good way for institutional investors to diversify their portfolios and gain exposure to emerging market stocks. The fund's low expense ratio makes it an attractive option for institutional investors.
• Financial advisors: The fund can be a good way for financial advisors to provide their clients with exposure to emerging market stocks. The fund's track record of performance makes it a solid choice for financial advisors.

Estimated Annual Sales

The First Trust Emerging Markets AlphaDEX Fund has estimated annual sales of over $1 billion. The fund's popularity is due to its strong performance, low expense ratio, and diversified portfolio.

Investment Strategy

The First Trust Emerging Markets AlphaDEX Fund uses a proprietary index, the AlphaDEX Emerging Markets Index, to select stocks for investment. The index is designed to identify stocks that are undervalued and have the potential to outperform the broader emerging market index.

The fund's investment strategy is based on the following principles:

• Value investing: The fund invests in stocks that are trading at a discount to their intrinsic value. The fund's managers believe that these stocks have the potential to outperform the broader market over the long term.
• Active management: The fund is actively managed by a team of experienced portfolio managers. The managers use their expertise to select stocks that they believe are undervalued and have the potential to outperform.
• Diversification: The fund invests in a diversified portfolio of emerging market stocks. This diversification helps to reduce risk and improve returns.

Performance

The First Trust Emerging Markets AlphaDEX Fund has a strong track record of performance. The fund has outperformed the broader emerging market index over the past 10 years.

The fund's performance is due to its disciplined investment strategy and experienced portfolio managers. The fund's managers have a deep understanding of emerging markets and are able to identify stocks that are undervalued and have the potential to outperform.

Risks

The First Trust Emerging Markets AlphaDEX Fund is subject to a number of risks, including:

• Market risk: The fund's value can fluctuate with the broader market. The fund is particularly subject to risk during periods of market volatility.
• Emerging market risk: The fund invests in emerging market stocks, which are subject to a number of risks, including political instability, economic instability, and currency fluctuations.
• Active management risk: The fund is actively managed, which means that its performance can be affected by the decisions of the portfolio managers.

Conclusion

The First Trust Emerging Markets AlphaDEX Fund is a solid choice for investors who are looking for exposure to emerging market stocks. The fund's actively managed approach, low expense ratio, and diversified portfolio make it a good option for a variety of customer segments.

Value Proposition of First Trust Emerging Markets AlphaDEX Fund

Investment Objective

The First Trust Emerging Markets AlphaDEX Fund (the "Fund") seeks long-term growth of capital.

Key Features and Benefits

• Exposure to Emerging Markets: The Fund provides investors with exposure to the rapidly growing emerging markets, which have the potential for significant long-term returns.
• AlphaDEX Index Tracking: The Fund tracks the BlueStar Emerging Markets AlphaDEX Index, which is designed to outperform the emerging markets benchmark index (MSCI Emerging Markets Index) by using a rules-based, quantitative approach.
• Quantitative Approach: The AlphaDEX Index selects stocks based on a combination of fundamental factors, momentum factors, and volatility factors. This systematic approach aims to identify undervalued and underappreciated stocks with the potential for superior growth.
• Diversification: The Fund invests in a broad universe of emerging market companies across various sectors and countries. This diversification helps mitigate the risk associated with investing in any single emerging market or industry.
• Sector Rotation: The AlphaDEX Index employs a dynamic sector rotation strategy, adjusting its weightings based on the relative attractiveness of different sectors. This strategy seeks to capture the growth potential of various industries as they gain or lose momentum.
• Efficient Portfolio Management: The Fund's rules-based approach allows for efficient portfolio management, minimizing transaction costs and turnover.
• Transparency: The AlphaDEX Index methodology is fully transparent and available to investors. This transparency provides investors with confidence in the Fund's investment process and performance.

Target Investor Profile

The Fund is suitable for investors who:

• Seek long-term capital growth
• Are comfortable with the potential risks associated with emerging markets investing
• Understand the AlphaDEX Index methodology and its potential benefits
• Have a moderate to high-risk tolerance

Performance

The Fund has outperformed its benchmark index (MSCI Emerging Markets Index) since its inception in March 2019.

Risks

Investing in the Fund involves the following risks:

• Emerging Market Risk: Emerging markets are more volatile and less developed than developed markets, increasing the potential for significant fluctuations in the value of the Fund's investments.
• Foreign Currency Risk: The Fund's investments are denominated in foreign currencies, which can be affected by currency fluctuations, potentially reducing the value of the Fund's investments.
• Political and Economic Risk: Emerging markets can be subject to political and economic instability, which can impact the Fund's investments.
• Index Tracking Risk: The Fund's performance may not exactly replicate the performance of the AlphaDEX Index, and the AlphaDEX Index may not always achieve its intended goals.
• Quantitative Investing Risk: The AlphaDEX Index's rules-based approach may not identify all undervalued stocks or accurately predict future market trends.

Risk Factors for First Trust Emerging Markets AlphaDEX Fund

Investment Risks:

• Emerging Markets Risk: The Fund invests primarily in emerging market securities, which are subject to greater political, economic, social, and regulatory risks than developed market securities. Emerging markets may have unstable governments, weak legal systems, limited access to capital markets, and volatile currencies.
• Country Concentration Risk: The Fund may invest a significant portion of its assets in a particular emerging market country. Events in that country could have a substantial impact on the Fund's performance.
• Currency Risk: The Fund's investments are denominated in foreign currencies. Changes in currency exchange rates may adversely affect the value of the Fund's investments.
• Equity Risk: The Fund invests in equity securities, which may fluctuate in value and could result in losses.
• Small-Cap Company Risk: The Fund may invest in small-capitalization companies, which generally have higher volatility and liquidity risk than larger-cap companies.
• AlphaDEX Methodology Risk: The Fund uses the AlphaDEX methodology, which relies on quantitative models to select securities. The AlphaDEX methodology may not be successful in identifying undervalued securities and could result in underperformance.

Management Risks:

• Portfolio Management Risk: The Fund's investment advisor, First Trust Advisors L.P., makes investment decisions for the Fund. The advisor's investment decisions may not produce the desired results or may be influenced by factors unrelated to the Fund's investment objectives.
• Conflicts of Interest: First Trust Advisors L.P. and its affiliates may manage other investment funds that invest in similar or different asset classes. This may create conflicts of interest, where the advisor may prioritize the interests of other funds at the expense of the Fund.

Other Risks:

• Liquidity Risk: The Fund's investments may not always be easily sold, particularly in volatile market conditions.
• Tax Risk: The Fund's distributions may be subject to U.S. federal and state taxes, as well as withholding taxes in the countries where the investments are made.
• Operational Risk: The Fund may be subject to operational risks, such as errors in portfolio management or trading, data breaches, or cybersecurity incidents.

Additional Considerations:

• Investors should consider their own risk tolerance and investment objectives before investing in the Fund.
• The Fund is not suitable for all investors.
• Investors should consult with a financial advisor before making an investment decision.