FT Portfolios Canada Co., known as First Trust Canada, is launching First Trust Dorsey Wright Dynamic U.S. Sector Rotation Index ETF, which seeks to replicate, to the extent possible, the performance of a total return U.S. equities industry sector rotational index, net of expenses.

Specifically, the exchange-traded fund (ETF) currently seeks to replicate the performance of the Dorsey Wright dynamic U.S. sector focus five index, net of expenses, and will generally seek to hedge substantially all of its U.S. dollar currency exposure back to the Canadian dollar.

The index, which is owned and operated by New York-based Nasdaq Inc., employs a rules-based U.S. sector rotation strategy that uses proprietary relative strength signals to construct a dynamic U.S. equities portfolio. The portfolio provides equal-weighted exposure to five Toronto Stock Exchange (TSX)-listed U.S. sector index ETFs that represent the strongest U.S. sectors based on relative strength.

The U.S. sectors include, but may not be limited to: consumer staples, consumer discretionary, energy, financial, industrials, health care, materials, technology and utilities.

Exposure to U.S. cash equivalents is also evaluated and the inclusion and weight of a U.S. cash allocation in the index is adjusted based upon its rank relative to the U.S. sectors. The U.S. cash allocation is a U.S. dollar-denominated cash position represented by nine equally weighted U.S. treasury-bills ranging from 30 to 91 days in duration.

“First Trust Dorsey Wright Dynamic U.S. Sector Rotation Index ETF (CAD-Hedged) provides a simplified way for Canadian investors to gain exposure to a sector rotation strategy with the ability to allocate to cash equivalents,” says Karl Cheong, CFA, head of ETFs at First Trust Canada, in a statement. “Dorsey Wright’s research on relative strength is widely followed in North America and we are pleased to offer this ETF, which tracks an index that combines its insights with First Trust’s fundamentally weighted lineup of TSX-listed U.S. sector index ETFs.”

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