First Trust Active Factor Small Cap ETF

First Trust Active Factor Small Cap ETF (AFSM) is an actively managed fund holding about 334 US-listed small-company stocks, picked by a computer model that scores value, momentum, quality and low volatility. Its 0.75% expense ratio is the highest among nine comparable small-cap funds, against a peer average of 0.31%. Its 22.2% one-year price return ranked first in that group as of October 27, 2026.

• Over the year to Oct 27, 2026, AFSM returned +22.2%, 1st of 9 among similar funds.
• Its 5-year annualized return was +9.4%.
• In the 2020 COVID crash it fell 42.8% and regained its old high 8.1 months after the low.
• Its worst full calendar year was 2022 (-17.5%); its best was 2021 (+26.0%).
• The deepest fall in its price history was 43.5% (Jan 16, 2020 to Mar 23, 2020), recovered by Dec 4, 2020.

As of Aug 31, 2026, the fund held 334 securities; the ten largest made up 8.57% of assets.

• Over the three months to Aug 31, 2026, investors added a net $24.1M (creations minus redemptions, per the N-PORT report).
• Monthly total returns reported for that quarter: +8.60%, -2.73%, +0.30%.

AFSM does not track an index. Under normal conditions, it puts at least 80% of its net assets in US-listed small-cap stocks. The fund counts a company as small cap if, when bought, its stock market value runs from $250 million up to the largest company in a widely recognized small-cap index. That ceiling was $52.96 billion as of November 28, 2025. If a holding later grows past the limit, the fund does not have to sell it.

First Trust's managers use a quantitative, or rules-based, model built on investing "factors." These are traits that research links to returns. The fund may use four of them. Value means a low price compared with a company's fundamentals. Momentum means strong recent price performance. Quality means sound finances. Low volatility means smaller price swings. The managers can change these factors as markets or research change. Risk controls limit how much the fund leans on any single stock, industry or sector.

The result is a widely spread portfolio. As of August 31, 2026, the fund held 334 stocks and its top 10 made up just 8.57% of assets. The largest were Par Pacific Holdings (1.1%), Eton Pharmaceuticals (1.0%) and National HealthCare (0.98%). It held no derivatives, and about 87% of assets were in US-based companies. Portfolio turnover was 65%, meaning the fund replaces a large share of its holdings each year.

• AFSM charges 0.75% a year, versus an average of 0.31% for the similar funds below (9th of 9, cheapest first).

It is a high-cost, actively managed small-cap fund that has suffered deep drops, so it fits better as a small add-on than as a core holding.

AFSM could add a tilt toward smaller US companies chosen for value, momentum, quality and low volatility. The trade-off is steep declines. In the 2020 COVID crash it fell 42.8% and took about eight months to recover. In the 2022 bear market it dropped 26% and needed nearly 15 months to regain its high, on December 22, 2023. Its worst calendar year was 2022, at -17.5%. The fund launched in December 2019, so it has no record from 2008. Anyone forced to sell shares for spending money during a fall like 2020's would have locked in large losses. Income is small: the trailing yield was 0.5% as of October 27, 2026, paid quarterly. Its 0.75% expense ratio is more than double the 0.31% peer average. Past results don't predict future returns, and a plan should look at the whole portfolio, not one fund.

Matched by holdings overlap from the latest N-PORT reports.