Access European IPOs With This New ETF

Investors looking to access initial public offerings in Europe have a new exchange traded fund with which to accomplish that objective. The First Trust IPOX Europe Equity Opportunities ETF FPXE debuted last week.

What Happened

The First Trust IPOX Europe Equity Opportunities ETF is the latest IPO ETF from Illinois-based First Trust. First Trust has had success with the First Trust US Equity Opportunities ETF FPX.

FPX, which is 12 and a half years old, targets the IPOX Global Composite Index and has $1.17 billion in assets under management.

Why It's Important

The new First Trust IPOX Europe Equity Opportunities ETF follows the IPOX 100 Europe Index. That benchmark “is a market-cap weighted portfolio measuring the performance of the 100 largest and typically most liquid initial public offerings (IPOs) (including spin-offs and equity carve-outs) of companies that are economically tied to Europe, ranked quarterly by market capitalisation, in the IPOX Global Composite Index,” according to First Trust.

Like the aforementioned FPX, the new FPXE holds 100 stocks. FPXE's underlying index caps individual constituent weights at 10 percent. The index can hold stocks for up to 1,000 days following the IPO and can include those stocks on the sixth day following the IPO.

“Recent IPOs and spin-offs represent an important segment of the European stock market that is often absent from other European focused index ETFs. This fund provides a unique strategy for investors to gain exposure to the innovation and growth of these stocks before many are added to broad index funds,” Ryan Issakainen, senior vice president and ETF strategist at First Trust, said in the statement.

What's Next

Europe's IPO market has been robust this year. As of the end of the second quarter, “European IPO market ended H1 2018 with total proceeds raised for the first half of the year of €21.8bn raised from 168 IPOs, an increase of 5% in money raised and 4% increase in the number of IPOs compared to H1 2017, when 161 IPOs raised €20.8bn,” according to PwC.

FPXE charges 0.70 percent per year, or $70 on a $10,000 investment.

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