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IPOX® 25 Portfolio, Series 1

When a company decides to “go public,” they participate in an initial public offering, or IPO, to make their shares available to the general public for the first time. Companies engage in IPOs for various reasons including to gain access to the capital markets in order to fund future growth and expansion. There is often a lot of excitement surrounding an IPO and it is common for the closing market share price shortly after the IPO to be well above or below the initial offering price. The IPOX® 25 Portfolio provides a unique way for investors to add diversified exposure to newly listed companies. Moreover, the portfolio provides a way to gain access into the innovation and potential growth of the U.S. economy within a disciplined and transparent product.

The IPOX®-100 U.S. Index measures the performance of the top 100 U.S. IPOs and spin-offs ranked quarterly by market capitalization in the IPOX Global Composite Index. In general, eligible constituents are added on the sixth day of trading and remain eligible to be included in the index for approximately four years. The index follows a well-researched, totally disciplined and transparent methodology and has historically captured around 85% of total market capitalization created through U.S. IPO activity during the past four years.

Broaden Market Exposure

While IPOs constitute a significant portion of the capital markets, there is a substantial time lag before they are added to most broad equity indexes. A portfolio of recent IPOs may complement a core domestic holding by providing more complete exposure to the total equity market.

  • As of 12/31/2020, the IPOX®-100 Index holdings represented just 4.36% of the Russell 3000 Index, despite the fact that these stocks had an average market capitalization of approximately $14.8 billion each.1
  • The U.S. IPO market is economically significant. Since 1995, an average of $350 billion per year in market cap has been created through U.S. IPO and spin-off activity.
  • In 2020, 210 companies went public, including IPOs, spin-offs and direct listings, an increase of 25.00% from 2019. These companies raised $76.29 billion, up 74.49% from 2019.2

Portfolio Objective

This unit investment trust seeks capital appreciation; however, there is no assurance the objective will be met.

Portfolio Selection Process

Identify the Universe – We begin with all constituents in the IPOX®-100 Index that have been trading for at least six months and eliminate Real Estate Investment Trusts (REITs), Regulated Investment Companies (RICs), and Limited Partnerships (LPs). All companies selected for the portfolio must have a market capitalization greater than $1 billion and a 3-month average daily trading volume of greater than $5 million as of the date the portfolio was selected. In addition, the IPOX® 100 Index includes spin-offs and companies that are the result of merger & acquisition (M&A) activity, so those companies may be included in the portfolio.

Rank all the Eligible Securities on Three Equally Weighted Factors

  • Momentum: 3-month price appreciation (50%) and 6-month price appreciation (50%)
  • Quality: Return on equity
  • Growth: Estimated Revenue Growth

Select Companies with the Highest Combined Ranks - Select 25 equally weighted stocks with the best combined factor rank, subject to a maximum of 10 stocks in any one of the major Global Industry Classification Standards (GICS) market sectors.


1Source: FactSet. The Russell 3000 Index is a stock market index of US stocks. This index measures the performance of 3,000 publicly held U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market.
2IPOX Schuster LLC
A patent with respect to the IPOX® index methodology has been issued (U.S. Pat. No. 7,698,197). IPOX® is a registered international trademark of IPOX® Schuster LLC (www.ipoxschuster.com).

Not FDIC Insured • Not Bank Guaranteed • May Lose Value

You should consider the portfolio's investment objectives, risks, and charges and expenses carefully before investing. Contact your financial professional or call First Trust Portfolios, L.P. at 1.800.621.1675 to request a prospectus, which contains this and other information about the portfolio. Read it carefully before you invest.

Risk Considerations
An investment in this unmanaged unit investment trust should be made with an understanding of the risks involved with owning common stocks, such as an economic recession and the possible deterioration of either the financial condition of the issuers of the equity securities or the general condition of the stock market.

An investment in a portfolio containing small-cap and mid-cap companies is subject to additional risks, as the share prices of small-cap companies and certain mid-cap companies are often more volatile than those of larger companies due to several factors, including limited trading volumes, products, financial resources, management inexperience and less publicly available information.

Large capitalization companies may grow at a slower rate than the overall market.

The stocks of companies that have recently completed an IPO are unseasoned equities lacking a trading history, a track record of reporting to investors and widely available research coverage. Stocks of these companies are often subject to extreme price volatility and speculative trading.

An investment in foreign equities should be made with an understanding of the additional risks involved with foreign issuers, such as currency fluctuations, political risk, withholding, the lack of adequate financial information, and exchange control restrictions impacting foreign issuers.

As the use of Internet technology has become more prevalent in the course of business, the trust has become more susceptible to potential operational risks through breaches in cybersecurity.

The COVID-19 global pandemic has resulted in major disruptions to economies and markets around the world. Financial markets have experienced extreme volatility and severe losses, negatively impacting global economic growth prospects. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty and may exacerbate other political, social and economic risks.

The value of the securities held by the trust may be subject to steep declines or increased volatility due to changes in performance or perception of the issuers.

Although this portfolio terminates in approximately 15 months, the strategy is long-term. Investors should consider their ability to pursue investing in successive portfolios, if available. There may be tax consequences unless units are purchased in an IRA or other qualified plan.

The information in the prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. The prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
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The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
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